KVP Interest Rate - Chart, Benefits & Interest Applicability on Premature Withdrawal of KVP

Investing for the long term can often mean choosing safe government-backed instruments that lock in your capital and offer decent returns without high risk. The Kisan Vikas Patra (KVP) scheme is one such option.

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What is Kisan Vikas Patra (KVP)?

The Kisan Vikas Patra (KVP) is a savings certificate scheme introduced by the Government of India via the postal system. The idea: you deposit a lump sum, it accrues guaranteed interest (compounded annually) and after a fixed period your investment doubles. Originally targeted to farmers (hence “Kisan”), today it is open to eligible citizens and provided through post offices (and select banks) across India.

Key features to know:

• Minimum investment is ₹ 1,000.
• There is no upper limit on how much you can invest.
• The maturity period (time to double your money) depends on the interest rate prevailing when you open; currently it’s roughly 115 months (9 years 7 months) at the present rate.

Current Interest Rate & Historical Chart

Latest Rate (2025)

• For Q1 FY 2025-26 (April 1, 2025 onwards) the interest rate on KVP is 7.50% per annum, compounded annually.
• It is also confirmed that for the quarter Oct-Dec 2025 the rate remains unchanged at 7.50%.

Historical Interest-Rate Chart (Key Milestones)

Period

Interest Rate

Approximate Maturity / Doubling Period

01-04-2023 to 31-12-2025

7.5%

115 months (9 yrs 7 months)

01-01-2023 to 31-03-2023

7.2%

120 months (10 years)

01-10-2022 to 31-12-2022

7.0%

123 months

01-04-2020 to 30-09-2022

6.9%

124 months

So you can see the rate has gradually moved (and matured period adjusted) over time, but since April 2023 the rate has held at 7.5%.

What does 7.5% mean for doubling?

At 7.5% p.a. (compounded annually), your investment would double in about 115 months (9 yrs 7 months). For example, if you invest ₹ 100,000 now, you would receive ₹ 200,000 at maturity (subject to rules).

Benefits of KVP Scheme

Here are the key advantages of investing in KVP:

• Guaranteed return: Unlike market-linked instruments, KVP offers a fixed (government-notified) interest rate and the maturity amount is shown on the certificate.
• Safety: Being backed by the Government of India, your deposit is secure.
• Doubling your money: With the current timeframe, your investment doubles in under 10 years, which is attractive for a low-risk saver.
• Flexible investment size: Minimum is ₹ 1,000, and there is no upper cap—so you can invest as much as you like (subject to cash transaction norms).
• Accessibility: Can be bought at India Post branches and, in some cases, via certain banks.
• Collateral/Loan use: The certificate can be used as security for loans with banks.

Eligibility & Other Key Features

• You must be a resident Indian citizen and at least 18 years of age. An adult can invest on behalf of a minor.
• Hindu Undivided Families (HUFs) and Non-Resident Indians (NRIs) are not eligible.
• Certificates are available in denominations of ₹ 1,000, ₹ 5,000, ₹ 10,000 and ₹ 50,000.
• Investment payment can be via cash, cheque, demand draft as per post office rules; PAN, Aadhaar and KYC may be required for higher amounts.
• Your certificate will indicate the date of issue, maturity date and maturity amount (which doubles).

Premature Withdrawal / Early Encashment – How It Works

While KVP is designed to run the full term (currently 115 months), you might need to cash in early. The rules for premature or early withdrawal are strict and limited, so it’s important to understand them.

What is “premature encashment”?

It means encashing or withdrawing the certificate before maturity (the full term when it doubles). KVP allows this only under certain special conditions.

Conditions of early encashment

According to scheme details:

• Generally, full maturity happens after 115 months.
• Early withdrawal is only permitted in special situations, for example: death of certificate holder, court order, forfeiture by pledgee (under certain rules).
• For other normal cases, you can only encash after minimum lock-in (30 months / 2 yrs 6 months) but that is still a long time relative to many instruments.

How premature value is calculated

If you encash early (post lock-in), your value will be pro-rated based on the period completed (interest for those years) but you will not get full doubling. For example, websites show a table for older rate: if you invest ₹ 1,000 and encash after 6 years, you might get around ₹ 1,476 (instead of ₹ 2,000 for full term) at 7.2% rate.

So while withdrawal is possible, you lose the big benefit of doubling and you must meet the eligibility for withdrawal.

Tax Implications & Other Important Rules

• Interest earned on KVP is taxable. You must include the interest in your taxable income. There’s no deduction under Section 80C for investment in KVP.
• There is no TDS on KVP maturity, but you must declare the interest.
• The maturity value (principal + interest) is not eligible for deduction; the doubling is a result of interest compounding.
• Since the rate is reviewed quarterly, when you open a certificate the applicable rate at that time will determine the doubling period. So opening earlier at a higher rate gives an advantage.

Who Should Consider KVP?

• Conservative savers looking for fixed, guaranteed return and comfortable with a nearly 10-year horizon.
• People who do not need their funds in short term and can stay invested for the full period.
• Those looking for a “safe zone” investment outside volatile equity markets and willing to get a modest but secure return.
• The scheme is less suited if you want tax deduction benefits (there aren’t many) or require liquidity within 5 years.

Things to Keep in Mind / Limitations

• The term (9 yrs 7 months) is fairly long compared to many bank deposits or other instruments, so your money is tied up.
• Interest rate may change in future for new certificates, so if a lower rate comes later new investments will take longer to double.
• Since interest is taxable and there’s no tax deduction, the net return after tax may be less attractive, particularly for higher income savers.
• Early withdrawal is severely restricted, making it less favourable if you may need your money earlier.
• Inflation risk: Over 9-10 years, inflation may reduce real purchasing power—so consider alongside inflation-beating options if you want growth.

Summary

The Kisan Vikas Patra is a unique small-savings instrument in India, offering a 7.50% p.a. interest rate in 2025, with a doubling period of about 115 months. It is safe, government-backed, simple to understand, and suitable for long-term savers seeking guaranteed returns. However, its long lock-in, taxable interest and limited liquidity mean you should make sure it aligns with your financial goal horizon. If you are comfortable staying invested for 10 years and want to park money securely, KVP is worth considering.