Automated Form 16 Part B for the F.Y.2014-15 with all new Tax Section and Tax Slab as per Budget 2014-15
Investments can be made in denominations of Rs 1,000, Rs 5,000, Rs 10,000 and Rs 50,000 in the new KVP. By comparison, the earlier version allowed investments of at least Rs 100. There is no upper limit to investments in this instrument.
“The certificates can be issued in single or joint names and can be transferred from one person to any other person/persons multiple times. The facility of transfer from one post office to another anywhere in India and of nomination will be available,” says a finance ministry press release.
But there are some experts who see long-term benefits. “There are three readings coming out of the re-launch of KVP: 1) The nation needs savings at any cost, as the savings in the country have dropped; 2) the economy, in addition to foreign funds, also wants to mobilise domestic savings; and 3) it does not want hot money being invested, as this won’t be invested for the long term; comparatively, retail money is stable,” says Ashvin Parekh, managing partner of Ashvin Parekh Advisory Services LLP.
Should you invest?
“Even in its new avatar, KVP is not compelling enough for individual investors,” Though KVP is offering lucrative returns at 8.7 per cent, it does not enjoy any tax benefit. Therefore, it is not meant for those in the 20 per cent and 30 per cent tax brackets, he adds. In the highest tax bracket, KVP will give you 6.09 per cent after tax. By comparison, State Bank of India’s fixed deposits maturing in 5-10 years will give 8.5 per cent pre-tax or 5.95 per cent after tax (highest tax bracket). Interest income is taxed at the slab rate even for tax-saving fixed deposits of five years.
(NSC) gives 8.5 per cent for certificates maturing in five years and 8.8 per cent for those maturing in 10 years. Here, too, the interest income is taxable – a five-year certificate will give 5.95 per cent, while a 10-year certificate will give 6.16 per cent. Public Provident Fund, which earns 8.7 per cent exempt of tax, is the most attractive among these instruments, though the money is locked in for 15 years and only partial withdrawal is allowed from the seventh year.