Was Kisan Vikas Patra (KVP) interest rate hiked and tenure changed for the Oct-December 2022 quarter?

The government increased interest rates on a few small savings schemes. Interest rates for small savings are reviewed and at times revised by the government on a quarterly basis. Small savings schemes include the Senior Citizen Saving Scheme, Kisan Vikas Patra, and Monthly Income Scheme.

KVP interest rate
For the quarter ending December 31, 2022, the government has hiked the interest rate of KVP by 10 basis points from 6.9% to 7%. And tenure was changed to 123 months from 124 months.
Interest rate for the quarter ending December 31, 2022 is 7 % which is compounded annually.


Payment on maturity
According to the KVP rules, “Deposits made in the account shall double on maturity. Maturity period of an account shall be nine years and five months commencing on the date of deposit. Amount of maturity may be repaid to the account holder on an application in Form-2 submitted to the accounts office. (2) The maturity period of the deposit under this Scheme shall be determined on the rate of interest applicable at the time of opening the account.”

Premature closure of account
According to the KVP notification, below are the condisiotns when KVP can be closed prematurely;
“(1) The account may be prematurely closed by the account holder by making an application in Form-3 to the accounts office, at any time before maturity under the following circumstances, namely:-
(a) on the death of the account holder in a single account, or any or all the account holders in a joint account;
(b) on forfeiture by a pledgee, being a Gazetted Officer;
(c) when ordered by a court.
(2) On the closure of the account under sub-paragraph (1), principal amount alongwith simple interest calculated at the rate applicable from time to time to Post Office Savings Account for the complete months for which the account has been held, shall be payable.
(3) Notwithstanding anything contained in sub-paragraph (2), if an account is closed any time after the expiry of two years and six months from the date of opening of the account, the amount, inclusive of interest shall be payable.”

Tax benefits
The returns are completely taxable, and the plan is not eligible for tax reductions under Section 80C of the Income tax act. However, withdrawals made after the maturity period are not subject to TDS (Tax Deducted at Source).