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NSC vs KVP - What is the Difference Between NSC and KVP

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Gaurav Seth
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NSC vs KVP

National Savings Certificate & Kisan Vikas Patra are the popular savings schemes offered by the Government of India. Both the schemes are good low-risk investment options for a long-term investment. These schemes are amongst the various postal savings schemes offered in post offices across the country. Kisan Vikas Patra is also available for purchase in some of the registered public & private sector banks.

Let’s have a look at the comparison of both these schemes: 

National Savings Certificate or NSC  

National Savings Certificate is a small savings scheme launched by the Government of India. The objective of the scheme is to promote the habits of small savings & investments among Indian citizens for meeting their financial goals. The scheme can be availed by depositors in the post office branches across the country. 

The scheme offers a fixed rate of interest on the lump-sum investment made by depositors. The interest is compounded annually & payable at maturity along with the initial investment.

Kisan Vikas Patra or KVP

Kisan Vikas Patra is a small savings scheme launched by the Government of India in 1988. The objective behind this scheme is to encourage long-term investments among rural people & farmers in India. The scheme promises to double the amount of investment made by depositors within a specified period. Currently, the maturity period of this scheme is 124 months, which is subject to quarterly revisions by the finance ministry of India.

Difference between NSC vs KVP

  • Nature of Investment

National Savings Certificate is a small saving certificate scheme where investors are required to make a lump-sum investment. The scheme pays a fixed rate of interest which is payable at maturity along with the principal invested.

Kisan Vikas Patra is a certificate scheme which promises to double the amount of initial investment made by the depositor at maturity. The maturity tenure of the KVP scheme is currently 124 months i.e 10 years & 4 months.

  • Investment Tenure

National Savings Certificate has a maturity tenure of 5 Years. 

Whereas, the KVP scheme has an investment tenure of 124 months currently which is 10 years & 4 months. So, the KVP scheme has a longer maturity tenure than NSC scheme.

  • Investment Limits

The minimum amount required to make investments in the NSC scheme is Rs.1,000 & in multiples of Rs.100. There is no upper limit for investments.

The minimum investment required in the KVP scheme is the same as NSC i.e Rs.1,000. And there is no upper limit for investments in this scheme either.

  • Premature Withdrawals

Premature withdrawals are not allowed in the NSC scheme. The scheme has a lock-in period of 5 years before which withdrawals can only be made in exceptional cases such as death or by court order etc.

The KVP scheme allows premature withdrawals after the completion of 2.5 years of lock-in period without any costs. 

  • Tax Benefits

Investments in NSC are eligible for tax deductions of up to Rs.1.5 lakhs under Section 80C of the Income Tax Act,1961. However, Interest earned on the NSC account is taxable as per the slab rate of the depositor.

The KVP scheme doesn't offer any tax benefits. Investments in KVP are not eligible for tax deductions.

ParametersNSCKVP
NatureSmall saving certificate scheme offering a low-risk lump-sum investment. Certificate saving scheme which doubles your investment within a specified tenure.
Investment Limits

Minimum: Rs.1000

Maximum:  No limit

Minimum: Rs.1000

Maximum: No limit

Investment Tenure5 Years124 months (10 Years & 4 Months)
Interest Rate6.8% p.a. (compounded annually & payable at maturity)6.90% p.a.
Premature WithdrawalsNot AllowedAllowed after 2.5 Years 
Tax BenefitsEligible for deductions of up to Rs.1.5 lakhs under Section 80C of IT Act,1961.No Tax benefits

NSC or KVP, Which is better?

Both the schemes are good picks for investors who are looking for a low-risk investment option. Investors can decide to invest in any one of these schemes as per their needs & requirements. The investors who have a very long investment horizon of more than 10 years can consider Kisan Vikas Patra for investment. And the investors who have a horizon of 5 years could consider investments in the National Savings Certificate. Also, Investors who want to make investments for tax-saving purposes can invest in NSC as it offers tax deductions under Section 80C.

More Information:

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Post Office Recurring Deposit: Scheme Benefits, Interest Rate, Eligibility Criteria

 

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