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KVP Vs NSC

by Acharya

KVP Vs NSC

Kisan Vikas Patra (KVP) and National Savings Certificate (NSC) are investment schemes targeted at small income households and are operated by the Government of India through Post Offices across the country.

The basic differences between KVP and NSC are listed below:

Tax Exemption

The investment in NSC and the interest earned thereby is exempted from tax under Section 80C of the Income Tax Act, while the amount invested and the interest earned on KVP is taxable.

Interest Rate

Interest is calculated at the rate of 8.7% annually on KVP investments, wherein the money invested is doubled at the time of maturity. In NSC, the interest rate is calculated at 8.5% per annum for 5 year investment and 8.8% per annum for 10 year investment. For 5 year investments in NSC, the amount at maturity is 160% of the amount invested.

Maturity/Lock-In Period

The lock-in period is minimum 5 years or maximum 10 years in NSC. However, the minimum lock-in period in KVP is 2.6 years while the maturity period is 8.4 years.

Denominations

KVP Certificates and NSC certificates are available in the following denominations and can be purchased in any combination without a ceiling on the maximum investment.

KVP offers following 4 denominations:

  • Rs. 1,000
  • Rs. 5,000
  • Rs. 10,000
  • Rs. 50,000

NSC offers:

  • Rs. 500
  • Rs. 1,000
  • Rs. 5,000
  • Rs. 10,000

Premature Withdrawal

Premature withdrawal of investment is not allowed in NSC while a pre-defined amount can be withdrawn from KVP investment. The interest would be pro-rated based on the period of investment.

Similarities

The basis similarities between NSC and KVP are as follows:

  • Investment limit: There is cap of the maximum allowed amount for investment in both NSC  and KVP
  • KVP and NSC can be purchased from post offices all over India and are issued by the government of India
  • NSC and KVP investments are valid as collaterals against loans from banks and other government recognized finance companies
  • Online purchase is restricted for both NSC and KVP
  • NSC and KVP are both fixed investment plans

KVP Vs NSC

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