When it comes to safe and guaranteed returns, government-backed investment schemes are a popular choice. Among the most trusted options are Kisan Vikas Patra (KVP) and National Savings Certificate (NSC). Both of these schemes are ideal for conservative investors looking for low-risk, fixed-return investments. However, there are key differences between them in terms of interest rates, tenure, and how they double your money. Here's a comparison to help you decide which one might suit your financial goals better.

1. What are KVP and NSC?

· Kisan Vikas Patra (KVP): KVP is a savings scheme offered by the Indian Post, which guarantees returns over a fixed tenure. It is designed for people who wish to invest a lump sum and receive a guaranteed return after a specific period. The main highlight of KVP is its ability to double the invested amount in a fixed time.

· National Savings Certificate (NSC): NSC is another government-backed savings bond, also available through India Post. It is mainly designed for long-term investors who want tax benefits along with a fixed return. The investment amount is locked for a certain period, and NSC earns compound interest on an annual basis.

2. Interest Rates and Returns:

· KVP:

o As of now, the interest rate for KVP is around 7.5% per annum (compounded annually).

o The principal doubles in approximately 10 years and 4 months, which means that KVP has a fixed doubling period.

· NSC:

o The interest rate for NSC is typically around 7% to 7.5% per annum (compounded annually).

o The doubling period for NSC is longer than KVP, as it takes 12 years for the invested amount to double (based on the current interest rates).

3. Which One Doubles Your Money Faster?

· KVP: KVP is specifically designed to double your investment in a fixed period, making it an attractive option for those seeking a quick return on their investment.

o Doubling Time: Approximately 10 years and 4 months at an interest rate of 7.5%.

· NSC: While NSC also offers a good return, it takes longer to double your money compared to KVP.

o Doubling Time: Approximately 12 years at an interest rate of 7% to 7.5%.

So, if faster returns are your priority, KVP wins the race.

4. Tenure:

· KVP: KVP has a fixed tenure of 124 months (approximately 10 years and 4 months). This is the time it takes to double your investment at the current interest rate. The investment can be prematurely encashed, but penalties may apply.

· NSC: NSC comes in two types of tenures:

o 5-Year NSC: With a fixed interest rate of around 7.5%. It is a shorter-term investment compared to KVP.

o 10-Year NSC: This longer tenure offers higher returns and benefits from compound interest on the principal invested.

The KVP has a shorter tenure for doubling your money, but NSC offers more flexibility, especially with its 5-year option.

5. Tax Benefits:

· KVP: The interest earned on KVP is taxable in the year of receipt, and there is no tax deduction at source (TDS). However, the principal investment is not eligible for tax deductions under Section 80C.

· NSC: One of the key advantages of NSC is the tax benefits. The amount invested in NSC is eligible for deduction under Section 80C of the Income Tax Act.

o This means you can claim a deduction of up to ₹1.5 lakh under this section.

o Additionally, the interest earned on NSC is taxable but is added to the principal amount and paid out at the time of maturity.

6. Liquidity:

· KVP: KVP is fairly liquid in nature. You can encash KVP after a minimum of 2.5 years from the date of purchase, though this may come with a penalty.

o You can also transfer the KVP to another person if needed.

· NSC: NSC, on the other hand, has less liquidity since the tenure can range from 5 to 10 years, and it cannot be encashed before the maturity period unless the investor passes away.

7. Who Should Invest in KVP vs NSC?

· Choose KVP If:

o You want a guaranteed doubling of your money in a fixed period.

o You are looking for a short-term investment (around 10 years).

o You do not need immediate tax benefits from the investment.

· Choose NSC If:

o You are looking for a tax-saving instrument that gives you deductions under Section 80C.

o You want a longer investment horizon, with options ranging from 5 to 10 years.

o You are okay with a slightly longer waiting period to double your investment (12 years).

8. Final Verdict:

· If your goal is to double your money faster, KVP is the better choice with its fixed 10-year and 4-month doubling period.

· If you are looking for tax benefits along with safe returns and are okay with a longer tenure, NSC could be more beneficial.

Both KVP and NSC are safe government-backed schemes with guaranteed returns, so your choice should depend on your specific investment goals, time horizon, and need for tax savings.

Disclaimer:

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