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For a long time, investments were treated as a luxury, but now people have started to pick up on the mantra of wealth creation. Nowadays, investments are among the ideal sources to generate wealth stably and securely.
Numerous private companies offer reliable insurance services, and some of them have withstood the unpredictable market for decades. This has increased the level of faith people put in these organisations; however, some might still doubt their credibility.
Those who prefer security and credibility over everything can opt for the investment schemes offered by the Indian government. These schemes are equally beneficial and also propose another level of protection.
Moreover, the schemes are vastly affordable and offer handsome returns as well. Along with these benefits, you also get additional features, making them the ideal package for a middle-class family. However, if you are a rookie in the field, then you are bound to be confused amidst the abundance of investment schemes.
If we compare the best ROI and sheer popularity, then PPF (Public Provident Fund) and KVP (Kisan Vikas Patra) stand out among the rest. The two are among the best government schemes, and if you are trying to opt for one of them, then the following information will help you out.
Before getting into the meticulous details, you should get the basic knowledge about Kisan Vikas Patra and Public Provident Fund:
Kisan Vikas Patra (KVP) is a government-operated scheme that started in 1988 in the form of a small saving certificate plan. KVP’s primary aim is to boost long-term money retention habits in people. It facilitates the same by doubling your invested amount on maturity.
KVP underwent some amendments in 2014, and its tenure has now been adjusted to 113 months (nine years and five months) as it pays an interest of 7.6 % compounded annually applicable from 01.07.2019. You can invest as low as 1000 INR with no upper-limit restrictions. KVP offers an abundance of additional benefits, making it a popular pick amidst the government investment schemes.
Public Provident Fund (PPF) is also a government-operated tax-saving instrument that was introduced way back in 1968. The scheme aims to accumulate small routine savings by proposing decent returns and tax benefits.
The plan’s tenure is 15 years that can eventually be extended for an additional five years. You can deposit as low as 500 INR, while the maximum amount can be 1.5 lakhs INR per annum. The applicant can either make a lump-sum payment or opt to deposit the same in 12 instalments. Just like KVP, PPF also offers numerous added benefits that make it a popular scheme as well.
Here are the six critical differences between KVP and ¬¬PPF:
A tax deduction is among the primary benefits we look for in an investment. As per section 80C, any investment made under PPF allows the investor to get a deduction of a maximum of 1.5 lakh INR within a financial year. Contrarily, there is no tax deduction feature available if you invest in KVP.
The initial goal of investing is to earn interest off it, so comparing the interest rates of KVP and PPF are crucial in making the right decision. An investment in PPF can help you obtain a 7.9% interest that is compounded yearly. KVP also lags in this section, as it offers an interest rate of 7.6% that is compounded annually.
There is no point in accumulating interest if you simply pay it on taxes. An interest earned under PPF is not taxable, meaning you get to keep the entire amount to yourself. In contrast, interest earned under KVP is considered income from other sources, thus making it liable to taxes.
The tenure period of investment significantly affects an investor’s decision and the maturity period of KVP and PPF may help you in making an informed decision. The tenure period under PPF is 15 years, whereas the period comes down to nine years and five months in the case of KVP.
The joint account facility is another essential part of an investment. You cannot open a joint account under PPF. However, KVP offers the option of opting for a joint account.
You may not always want to invest big, so you can consider the minimum deposits before choosing between KVP and PPF. The minimum amount you can invest under PPF is 500 INR, while you have to spend 1,000 INR for KVP.
The maximum investment under PPF is 1,50,000 INR, while there are no investment restrictions in the case of KVP.
Public Provident Fund and Kisan Vikas Patra are undoubtedly one of the most sought government investment schemes. Both schemes offer vital benefits that can aid investors in the long term. Moreover, they offer several similar benefits like loan facility and nomination availability. Therefore, investors will always face confusion while trying to choose between the two.
However, if you thoroughly go through their benefits, then you will notice that PPF offers greater flexibility alongside tax benefits. Whereas, in the case of KVP, you get long-term stability and low-risk retention.
Depending on the needs of the investor, they can choose either Public Provident Fund or Kisan Vikas Patra. In other words, anyone looking for an investment that offers long-term stability and minimum risk retention should opt for KVP. On the other hand, if you prefer flexibility and higher returns, then you should opt for PPF.
Furthermore, an investor can double his amount within nine years and five months. While these aspects might make Kisan Vikas Patra appear as the winner, you should keep in mind that this income will be subjected to taxes. At the same time, if you invest in Public Provident Fund, you can withdraw the money each year after the completion of 7 financial years, and the earned income will be entirely tax-free.