NSC Vs KVP

National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) are government-backed investment schemes in India designed to promote saving habits while offering guaranteed returns. Both options are ideal for investors seeking safety and stability over market-linked volatility. While both schemes feature low risk, NSC is better suited for tax-saving over a 5-year term, whereas KVP is designed for doubling the invested amount over a longer duration. 

This blog post will talk about the differences between the two schemes. We also explore NSC and KVP interest rates and other features. We will also do a side-by-side NSC vs KVP comparison so you can make the right investment decision.

What are National Savings Certificates (NSC)?

National Savings Certificate (NSC) is a government-backed fixed-income savings scheme offered by India Post. It is designed to encourage small and medium savings among individuals while ensuring guaranteed returns. You can apply for NSC at any post office and start investing with a nominal amount. NSC has a tenure of 5 years and offers an attractive interest rate, which is compounded annually but paid out at maturity.

Investments in NSC qualify for a tax deduction of Rs. 1.5 lakh under Section 80C of the Income Tax Act. Thus, it serves as a tax-friendly and low-risk investment option for conservative investors seeking assured returns and capital protection without exposure to market fluctuations.

What is Kisan Vikas Patra (KVP)?

KVP is a savings scheme started by the Indian government in 1988 to encourage long-term savings among citizens. It was initially established for farmers, hence the name. But it is now available to all citizens. You can register for KVP at any post office and some selected financial institutions. 

There are three types of KVP certificates.

1. Single holder certificate: This is issued to an adult. You can also request this type of certificate on behalf of a minor.

2. Joint A type certificate: This certificate is issued to two adults jointly. On maturity, the payout is issued to both holders. For transfer, nomination or cancellation, both holders' signatures are needed. 

3. Joint B certificate type: This certificate is also issued to two adults. However, on maturity, the payout is payable to either the holder or the survivor.

Difference Between NSC Vs KVP

Here are the differences between NSC and KVP

Features of National Savings Certificates 

Let’s have a look at some important features of NSCs:

1. The NSC maturity period is 5 years. 
2. You can invest only Rs. 100. There is no maximum limit.
3. The interest rate is fixed but reviewed by the government every 3 months. Currently, the NSC interest rate in 2023 is around 7.7%.
4. Only investments of up to Rs. 1.5 Lakhs are eligible for a tax deduction under section 80C of the Income Tax Act.
5. You can use NSC as collateral for a loan. However, the postmaster must authorize the certificate transfer to the financial institution.
6. You can transfer your NSC from one post office to another. You can also transfer your NSC to another person.
7. The investor can add nominees (including minors) to the scheme. In case the investor passes away during the tenure, the nominee inherits the scheme’s certificates.
8. The NSCs are easily accessible and can be opened at any authorized post office upon submission of the necessary documents.
9. The certificate can be withdrawn prematurely only upon a court order or the holder’s passing. 

Features of Kisan Vikas Patra

1. The KVP has a maturity period of 118 months, equivalent to 9 years and 10 months.
2. The minimum amount to start KVP is Rs. 1000. There is no maximum limit. 
3. KVP currently earns an interest rate of around 7.5%.
4. KVP can be used as collateral when applying for a loan in financial institutions.
5. You can withdraw from this scheme after two and a half years.
6. There is no Demat form available for KVP; it comes in physical form. 
7. There is no tax benefit under the KVP scheme, and the interest earned is taxable. However, upon the completion of the tenure, TDS (tax deducted at source) is not deducted from the final amount. 

NSC Vs KVP: Which Should You Pick?

That was our round-up of NSC vs KVP comparison. Both these schemes are some of the safest investments available to Indian citizens that also offer guaranteed returns.

So, between the two schemes, NSC vs KVP, which one should you invest in? Carefully weigh your financial needs and wants in our investment app before making a decision.

Ideally, NSC is best if you want to earn higher returns. At the same time, you can enjoy tax deduction benefits to maximize your earnings. It is also an ideal choice if you practice long-term savings, especially when you have a big financial goal to accomplish in the future.

KVP, on the other hand, is best if you want a slightly lower lock-in period in case an urgent financial need arises. It is also suitable for trusts looking to invest their funds, as NSCs are only for individuals.