The government in this Union Budget re-introduced the Kissan Vikas Patra (KVP) which was closed a few years back, on worries laundering of funds through such a product. It has been re-introduced in the Union Budget 2014 and if the features remain the same as before the KVP is not a great investment bet. Here are 4 reasons for the same.
No tax benefits like PPF
Other post office savings scheme like National Savings Certificate and Public Provident Fund offer tax exemption under Sec 80C of the Income Tax Act. When the KVP was closed there were no tax benefits and the Union Budget has not indicated if the re-introduced KVP would have any.
No comparison with PPF
Unlike the Public Provident Fund, where the interest income is tax free, the interest earned on Kissan Vikas Patra is taxable. This does not make it a great investment proposition.
Banks a better proposition for higher interest rates
Without any tax benefits and lower interest rates than banks, leaves very little room to invest in the Kissan Vikas Patra. In fact, most of the small savings schemes from the Post Office offer lower interest rates when compared to banks.
Bank deposits hassle free
Bank deposits are easily en cashable online, while the Kissan Vikas Patra may force one to visit the post office for redemption.