Kisan Vikas Patra (KVP) and National Savings Certificate (NSC) are two popular investment schemes offered by the Government of India. Both schemes offer guaranteed returns and are considered to be relatively safe investments. However, there are some key differences between the two schemes that may make one a better fit for your investment goals than the other.
The interest rates for KVP and NSC are set by the government and are subject to change. However, in general, the interest rates for KVP are slightly higher than the interest rates for NSC. For example, the current interest rate for KVP is 6.9%, while the current interest rate for NSC is 6.8%.
The lock-in period for KVP is 124 months (10 years and 4 months), while the lock-in period for NSC is 5 years. This means that you cannot withdraw your investment from KVP or NSC before the lock-in period is over. However, there are some exceptions to this rule, such as if you are terminally ill or if you need to use the money to pay for your child's education.
NSC offers some tax benefits that KVP does not. For example, you can claim a deduction of up to ?1,50,000 for your investment in NSC under Section 80C of the Income Tax Act. However, KVP does not offer any tax benefits.
Other Factors to Consider
In addition to the interest rates, lock-in period, and tax benefits, there are a few other factors to consider when deciding between KVP and NSC. These factors include:
- Your investment goals: If you are looking for an investment that will provide you with guaranteed returns over a long period of time, then either KVP or NSC could be a good option for you. However, if you are also looking for an investment that offers tax benefits, then NSC may be a better choice.
- Your risk tolerance: Both KVP and NSC are considered to be relatively safe investments. However, KVP is slightly riskier than NSC because it has a shorter lock-in period. This means that if you need to withdraw your investment before the lock-in period is over, you may have to pay a penalty.
- Your liquidity needs: If you need access to your investment money in the short term, then NSC may be a better choice than KVP because it has a longer lock-in period.
The decision of whether to invest in KVP or NSC for the long term depends on your individual investment goals and risk tolerance. If you are looking for an investment that offers guaranteed returns over a long period of time and you do not need access to your investment money in the short term, then either KVP or NSC could be a good option for you. However, if you are also looking for an investment that offers tax benefits, then NSC may be a better choice.
Which is Better for You?
If you are looking for an investment with guaranteed returns and a shorter lock-in period, then KVP may be a better choice for you. However, if you are looking for an investment with tax benefits and a longer lock-in period, then NSC may be a better choice for you.
Ultimately, the best way to decide which investment is right for you is to speak with a financial advisor. They can help you assess your individual needs and goals and recommend the best investment for you.