New Delhi. Kisan Vikas Patra Yojana ie KVP (Kisan Vikas Patra) is a small saving scheme of the post office. You can also start this scheme with an investment of 1000 thousand rupees.
There is no maximum limit for investment in this. In the Kisan Vikas Patra scheme, if the investor remains there for the whole time, then in 124 months the money becomes double. Compound interest is available on investment in this scheme. In this, tax exemption can be taken under section 80C of the Income Tax Act.
Now the question arises whether tax can be paid every year or at the time of maturity on the interest earned on Kisan Vikas Patra. Actually, the income received by way of interest from the KVP scheme is taxable in the hands of taxpayers under the head ‘Other sources’. The Income Tax Act provides for taxation on cash or accrual basis at the option of the taxpayer on income from other sources.
If the taxpayer opts for taxation on KVP interest on ‘cash basis’, then interest from KVP can be taxed at slab rates in the year of its maturity. Interest from KVP as per existing slab rates will be charged at the time of maturity of such scheme.
On the other hand, the taxpayer can opt to pay tax on such interest earned on an annual basis so as to distribute the tax liability equitably during the tenure of the instrument and avail slab rates every year.
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