NSC vs KVP: Comparison between National Savings Certificate and Kisan Vikas Patra in 2022

Date 19 Jul 2022
Time 5 min
4.5
Rated by 2 readers
  • Table of Contents

    Table of Contents

    • What is the National Savings Certificate?
    • What are the key features of the National Savings Certificate?
    • What is the Kisan Vikas Patra?
    • What are the key features of the Kisan Vikas Patra?
    • NSC vs. KVP: How do they compare?
    • NSC vs. KVP: Which one should you choose?
    • Conclusion

The government of India offers many kinds of investment schemes for investors from all walks of life. Most of these offer guaranteed returns, making them suitable for individuals with a low tolerance for risk.

The National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) are two of the many investment options backed by the Indian government. These two schemes come with their own unique features and benefits.

If you are an investor who is looking for some secure investment options to bring down your overall portfolio risk, the NSC and KVP are worth taking into consideration.

Want to know more about these two schemes and how they compare? Keep reading to find out all these details and more.

What is the National Savings Certificate?

The National Savings Certificate (NSC) is a small savings scheme initiated by the Indian government, through the Department of Posts. Formally, the scheme is known as the National Savings Certificates (VIIIth Issue) (NSC).

You can open an NSC account with the Indian postal department by making a minimum investment of Rs. 1,000. You can also open as many NSC accounts in your name as you want, just like FDs and savings bank accounts.

What are the key features of the National Savings Certificate?

To make an informed decision between the NSC and KVP, you need to know the specific features and benefits of each of these schemes. So, let us take a closer look at the main points to note about the National Savings Certificate.

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Investment amount
The minimum amount needed to open an account is Rs. 1,000. Thereafter, you can increase the investment amount in multiples of Rs. 100. There is no maximum limit on the amount you can invest in the National Savings Certificate Scheme.
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Investment tenure
The investment tenure is 5 years from the date of deposit. Your deposit will mature after this period.
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Premature closure of an NSC account
Premature closing of your NSC account is typically not permitted. However, only in the following exceptional circumstances can you close your NSC account before the 5-year term.
  • In case of the account holder’s death
  • In case of an order by a court
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Rate of interest
The deposit you make in the NSC scheme will earn interest that is compounded on an annual basis. The current rate of interest, from 01.04.2020, is 6.80% per annum. However, this interest will only be paid out at maturity.
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Eligibility to open an NSC account
The eligibility criteria for NSC are fairly simple. Here is a closer look at who can open an NSC account.
  • Any individual adult (in case of a single account
  • Up to 3 adults (in case of a joint account)
  • A guardian (in case of a minor or a person who is of unsound mind)
  • Minors above 10 years (in their own name)
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Limit on the number of accounts
There is no limit on the number of accounts that you can open under the National Savings Certificate scheme.
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Eligibility to open an NSC account
You can pledge your NSC account balance as security to any of the following authorities. –
  • The President of India or the Governor of your State
  • The Reserve Bank of India, or any other scheduled bank, co-operative society or co-operative bank
  • Any public or private corporation, any government company or a local authority
  • Any housing finance company
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Tax benefits²
The amount you deposit in your NSC account is eligible for deduction from your total taxable income, up to Rs. 1.5 lakhs. This is according to the provisions of section 80C of the Income Tax Act, 1961.

What is the Kisan Vikas Patra?

The Kisan Vikas Patra is another savings scheme introduced by the government of India, through the Department of Posts. The funds that are raised through this scheme are redirected towards the development of farmers in the country, which is why this scheme is known as the Kisan Vikas Patra.

To open your KVP account with the postal department, you only need to deposit Rs. 1,000. In this aspect, both the NSC and KVP are similar. But the Kisan Vikas Patra scheme comes with several unique features of its own, as you'll see in the next section.

What are the key features of the Kisan Vikas Patra?

Understanding the features and benefits of the Kisan Vikas Patra scheme can help you decide if this is the right investment option for you. So, let’s check out what the KVP scheme is all about.

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Investment amount
The minimum amount you need to open an account is Rs. 1,000. You can then increase the amount in multiples of Rs. 100. Again, as with NSC, there is no maximum limit on the investment amount permitted here.
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Investment tenure
The tenure of investment is decided by the Ministry of Finance, on the date of deposit. This varies from time to time.
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Premature closure of a KVP account
You can only close your KVP account prematurely in the following cases.
  • In case of the account holder’s death
  • In case of an order by a court
  • 2 years and 6 months after the date of deposit
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Rate of interest
The rate of interest on your KVP account balance is currently at 6.90% per annum, compounded annually.
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Eligibility to open a KVP account
The eligibility criteria for NSC and KVP are similar. Let’s check out who is eligible to open a KVP account.
  • Any individual adult (in case of a single account)
  • Up to 3 adults (in case of a joint account)
  • A guardian (in case of a minor or a person who is of unsound mind)
  • Minors above 10 years (in their own name)
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Limit on the number of accounts
Just like the NSC scheme, there is no limit on the number of accounts you can open under the Kisan Vikas Patra scheme too.
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Pledging of a KVP account
In case of any financial necessity, you can pledge the amount in your KVP account as security to the following authorities. –
  • The President of India or the Governor of your State
  • The Reserve Bank of India, or any other scheduled bank, co-operative society or co-operative bank
  • Any public or private corporation, any government company or a local authority
  • Any housing finance company

NSC vs. KVP: How do they compare?

You've seen the top features of the NSC and KVP. Let's quickly tabulate some of those features in one place to see how these two schemes differ from one another.

Particulars

National Savings Certificate

Kisan Vikas Patra

Investment tenure

5 years

Varies from time to time and decided by the Ministry of Finance

Rate of interest

6.80% per annum

6.90% per annum

Tax benefits¹

Deductions up to Rs. 1.5 lakhs u/s 80C of the Income Tax Act, 1961

No tax benefits

Premature closure of account

Not permitted

Permitted after 2 years and 6 months from the date of deposit

The National Savings Certificate may the ideal choice for you if –
  • You have an investment horizon of 5 years
  • You want to enjoy tax benefits¹ along with investment returns
  • You are comfortable with locking your money in for 5 years
The Kisan Vikas Patra may the ideal choice for you if –
  • You want an investment option with greater liquidity
  • You have already maximised your tax benefits¹
  • You prioritise a higher rate of return over tax savings

Conclusion

As you can see, both the NSC and KVP offer their own advantages to the investor. You can compare the features of these two investment schemes and choose the option that best fits your financial requirements and your budget.

Alternatively, if you have the financial capacity for it, you can also choose to invest in both the NSC and KVP. There is no explicit rule that you have to choose one over the other. So, the decision is entirely up to you.

If you are still unsure, or if you are looking for something more, a life insurance plan like the ABSLI Fixed Maturity Plan may be just what you need. It gives you everything that a fixed deposit does – right from guaranteed returns up to 6.41%^ and single premium investments starting from just Rs. 12,000. In addition to this, you also get the benefit of a life cover, so you can rest assured that even in your absence, your family will be financially secure.

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