KVP - Should you invest?

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KVP - Should you invest?

The re- launched Kisan Vikas Patra ( KVP), Even in its new avatar, KVP is not compelling enough for individual investors. Though KVP is offering lucrative returns at 8.7 per cent, it does not enjoy any tax benefit.

 

Therefore, it is not meant for those in the 20 per cent and 30 per cent tax brackets, he adds. In the highest tax bracket, KVP will give you 6.09 per cent after tax.

 

By comparison, State Bank of India's fixed deposits maturing in 5- 10 years will give 8.5 per cent pre-tax or 5.95 per cent after tax (highest tax bracket). Interest income is taxed at the slab rate even for tax saving fixed deposits of five years.

National Savings Certificate (NSC) gives 8.5 per cent for certificates maturing in five years and 8.8 per cent for those maturing in 10 years. Here, too, the interest income is taxable — a five- year certificate will give 5.95 per cent, while a 10 year certificate will give 6.16 per cent.

Public Provident Fund, which earns 8.7 per cent exempt of tax, is the most attractive among these instruments, though the money is locked in for 15 years and only partial withdrawal is allowed from the seventh year.

The recent past has seen some companies issue tax free bonds that deliver better returns.

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