Are you unable to make a choice between KVP Vs NSC? Are you confused as to which scheme is better for investment?
Without a doubt, KVP and NSC are low-risk financial instruments which are backed by the government of India.Both the schemes namely, Kisan Vikas Patra (KVP) and National Savings Certificate (NSC) guarantee assured returns to investors.
KVP Vs NSC
This article will compare KVP Vs NSC considering the essential parameters to determine which of the two schemes is better.
- Interest Rates
- Maturity Period
- Tax Benefits
- Partial Withdrawal Facility
- Loan Facility
Essential Parameters To Consider While Comparing NSC and KVP.
A comparison between NSC and KVP is made on the basis of these essential parameters. Let’s analyze these parameters one-by-one.
Both KVP and NSC almost perform equally when it comes to the interest rate on returns. The annual interest rate for KVP is 7.6%. While for NSC, it is 7.9%. Another point to be noted is that these interest rates keep changing quarterly.
Also Read : FD Vs Debt Funds Vs PPF Vs VPF
The maturity period of KVP is 113 months (9 years and 5 months). Whereas NSC’s maturity period is only 5 years. Coming to the main point, KVP is better than NSC as the interest earned is locked-in for the long-term. The maturity proceeds of KVP continue to accrue interest until you make the last withdrawal.
Premature Withdrawal Facility
Prematurely withdrawing from KVP is allowed after a period of 2 and ½ years from the date of certificate purchase. NSC is at a disadvantage in this case as it does not come with the facility of premature withdrawal. One can only avail the facility of premature withdrawal in NSC in case of the investor’s demise.
Both KVP and NSC come with a nomination facility under which an investor can nominate anyone. The nominee could be an adult as well as a minor. This facility ensures that the schemes will be inherited by a trustworthy nominee in the case of an unfortunate event.
Loan facility is available for both KVP and NSC. But for availing the loan facility, you must submit your KVP and NSC certificate as collateral. Furthermore, the interest rates for loans availed against KVP is normally lower than usual.
NSC is better than KVP in terms of the tax benefits that it offers. Yes, the interest that you earn from NSC is taxable but deduction can be claimed under section 80C. The returns in KVP are taxable as they don’t come under the purview of section 80C. Nonetheless, KVP withdrawals are not subject to TDS upon completion of the maturity period.
In the case of NSC, the accrued interest gets added to the principal amount on a yearly basis. When the policy matures in the next year, you earn interest on the principal amount. Similarly, the interest in KVP is also annually compounded.
Minimum Investment Amount
When it comes to the minimum investment amount, NSC outperforms KVP. It’s so because one can invest in NSC with a small sum whereas the same is not true for KVP. An NSC certificate can be purchased for just an amount of Rs. 100. On the other hand, the minimum investment amount in KVP is 1000.
Most Frequently Asked Questions About KVP and NSC
Is NSC a Good Investment?
NSC is a good investment as it offers great returns at a fixed interest rate. It’s perfect investors looking to park their funds for a short period of time.
Is The Interest On KVP Taxable?
Yes, the interest earned on KVP is taxable as the scheme doesn’t come under the purview of Section 80C.
Is NSC Taxable On Withdrawal?
Investments up to 1.5 lakhs are eligible for tax deduction under section 80C in case of NSC.
Is KVP Eligible For 80C?
No, KVP is not eligible for tax deduction under Section 80C of the Income Tax Act. Thus, the scheme doesn’t feature any tax exemptions, unlike NSC.
Is It Good To Invest In KVP?
KVP is good you’re looking for an avenue to park your hard-earned money for a long period of time. Besides, it’s one of the highly secure financial savings instruments of today’s age.
KVP and NSC are both ideal financial savings instruments for investors who’re in search of low-risk investment products. Both of these schemes outperform each other in one way or the other. Speaking of which scheme is better, you should opt for the one that suits your financial requirements.
The most important factor to consider while making a choice between KVP and NSC is your preferred investment period. So, if you’re planning to make an investment for the long-term, you should go for KPV. Otherwise, NSC would be an ideal product for your short-term financial needs.
Now that you’ve gone through this article on KVP vs NSC, take care that you make the right decision.
Till Then, Happy Investing!