Fixed deposit or Kisan Vikasputra, where will you get more profit by investing money?

New Delhi. Risk-averse investors invest heavily in small savings schemes and bank FDs. Bank FD is the preferred investment option of Indians. A lot of money is invested in fixed deposits because the risk of losing money is negligible and they get guaranteed returns. Post Office Small Savings Schemes also have almost similar features. One such small savings scheme is Kisan Vikasputra. This is a popular savings scheme.

Several other banks, including Axis Bank, HDFC, Union Bank, Bank of India and State Bank of India, have recently increased interest rates on Fixed Deposits (FDs) of certain tenures. If you also plan to get a bank FD, then you should also know about Kisan Vikas Putra (KVP) scheme of post office. Only after comparing FD and Kisan Vikasputra, you should decide where you should invest your money.

Kisan Vikas Putra (KVP)
Interest on Kisan Vikasputra is decided on a quarterly basis. At present, the government is giving interest on it at the rate of 7.5 percent. The lock-in period of KVP is two years and six months. This means that you cannot withdraw money from the scheme before two and a half years under normal circumstances. Its maturity period is 10 years. There is no maximum investment limit, but you have to invest a minimum of Rs.1000. A person investing in Kisan Vikas Putra should be at least 18 years of age. Apart from single account, joint account facility is also available. Minor children can also participate in this scheme, but they have to be supervised by their parents.

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Tax exemption is not available on Kisan Vikasputra, as this scheme does not come under 80C. The government deducts TDS on the income. This certificate can be transferred from one person to another. It can also be transferred from one post office to another post office. The amount invested in this scheme will double in 115 months ie 9 years and 7 months.

Bank FD
The amount deposited in a bank FD earns interest at a fixed rate which is determined at the time of opening the account. FD holders can choose to receive interest earned monthly, quarterly, half yearly or annually as per their choice. You can invest in FD for a tenure ranging from 7 days to 10 years. As far as tax exemption is concerned, tax exemption is available on 5 year tax saving FD. Not on FD with other tenures. Under Section 80C of the Income Tax Act, you can claim a deduction of Rs 1.5 lakh on the total taxable income on the Tax Saver FD.

Currently, Axis is offering an interest rate of 7.10 percent on FD with a tenure of two and a half years. The interest rate of State Bank of India is 7% per annum. If you open an FD account with HDFC Bank for two and a half years, you will get 7% interest. Bank of India is offering 6.75% interest while Union Bank is offering 6.50% interest.

Where is the greater benefit?
If we look at the interest rates, interest on Kisan Vikas Putra is higher than Bank FD with tenure of two and a half years. By investing in KVP, you will get interest at the rate of 7.5%, while currently no major bank is offering more than 7% interest on a two-and-a-half-year FD. As far as liquidity is concerned, Bank FD is better in this case. In Kisan Vikasputra, you cannot withdraw before two and a half years except in certain circumstances. At the same time, you can break bank FD anytime. Yes, doing so will earn you less interest and may also incur a penalty.

Tags: Bank FD, Investment Tips, Farmer Vikas Patra, Small savings schemes