CA Umesh Sharma

CA Umesh SharmaArjuna (Fictional Character): Krishna, recently the Government has reintroduced the investment scheme of “Kisan Vikas Patra Scheme, 2019”. There are many questions regarding this scheme but answer to the most important question is unascertainable. The earlier scheme of “Kisan Vikas Patra” was closed due to increasing black money from the scheme then why it is reintroduced?

Krishna (Fictional Character): Arjuna, Common Public invests in non-productive assets like Gold, Silver, properties etc. The intention of the government through this scheme is generation of funds for the development of the nation. People in the greed of having more returns get cheated by investing through Ponzi schemes and Private Investment schemes. The same should not happen is the motto of this scheme. Firstly you understand the scheme then we will discuss about the black money.

Arjuna: Krishna, what are the characteristics of the scheme “Kisan Vikas Patra”?

Krishna:Arjuna, Kisan Vikas Patra is the option of investment for common public. Investment in this scheme can be made through Post office in cash or through cheque. After some days this scheme will also be made available through Public Banks. The maturity period of Kisan Vikas Patra is nine years and five months. The investment made will be doubled after this period. Investor can make investment of Rs. 1,000, Rs. 5,000, Rs. 10,000, and Rs. 50,000 or in the multiple of this. There is no maximum limit for investing in this scheme. “Kisan Vikas Patra” certificates are transferrable from one person to other any number of times. The investor can avail loan by keeping these certificates with banks or any other financial Institutions. Even though the name of scheme starts with Kisan, any Individual or HUF can invest in the scheme.

Arjuna: Krishna, which documents are required for making Investment in the scheme?

Krishna: Arjuna, Investor should have to submit the following documents for identity:

1) Passport size photo

2) Identity Card any one of the following i.e. Election card, Ration Card, Passport, Driving License, etc.

3) Address Proof any one of the following i.e. Light bill, Telephone bill, Bank passbook etc.

4) Copy of PAN card is necessary if investment is above Rs. 50,000/-.

All these documents should be self-attested.

Arjuna: Krishna, What is the treatment of Kisan Vikas Patra in Income Tax?

Krishna: Arjuna, Interest from investments is required to be considered under “Income from Other Sources” and income tax will have to be paid on it. E.g. if Rs.1 lakh is invested in Kisan Vikas Patra scheme then after maturity the investor will get 2 lakhs. But the investor has to consider the interest income every year and has to pay income tax on it. Further it seems that in absence of PAN it is not possible for government to deduct TDS on Interest. But deduction under section 80C is not allowed on this investment.

Arjuna: Krishna, what about the question of Black money and what one should learn from this?

Krishna: Arjuna, many smart people can take disadvantage of the scheme. Because how the Income Tax Department will get information about the investment made is not clear. God knows how one will take benefit of no restriction of PAN and no TDS on Interest. Thus it has become difficult to find out whether these schemes will be beneficial to convert black money into white money. The period of 9 and half year for encashment and restriction of 6 years for Income Tax Department to re-open the case is hurdle for department. Thereby it becomes difficult to ascertain source of investment and tax it after 6 years. It is difficult for the Income Tax Department to find out the investor also in absence of PAN. It is a fact that every investor is not taxpayer but every taxpayer may be investor. According to this provision some may try to convert the black money to white. But if Government decides then restriction may be levied on it. The success or failure of the scheme depends on Government’s tax policy and Investor’s intention. Nothing can be said about the Government scheme and the intention of Public. Many times it is said Government’s schemes are good but the people’s implementation makes it bad. Kisan Vikas Patra se Kiska Vikas Hoga is not known.

Dear Tax guru lovers, your comment please, as they are very valuable and precious.

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14 Comments

  1. CA SATISH NEMANI says:

    The interest on KVP is taxable on accural basis i.e. interest ought to be disclosed as income every year. If the interest is not shown as income in ITR every year, then the difference between maturity value and face value would be taxed in the year of maturity. The income tax department may not able to tax face value in the year of maturity but entire interest for whole tenure of KVP would be taxed.

  2. yogesh bhoud says:

    black money convert to white money simple ligal process

    Ex.
    100,00,00,000

    2 month –
    10,00,00,000
    – 10% TDS
    = 9,00,00,000

    3 month to 14 month
    26,00,000
    – 10% TDS
    = 23,40,000 X 12 month
    = 2,80,80,000

    15 month to 26 month
    10,00,000
    – 10% TDS
    = 9,00,000 X 12 = 1,08,00,000

    36 month
    100,00,00,000
    – 10% TDS
    = 90,00,00,000

    TDS aapke pan card no pe cutting hota hai
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  3. Anamika says:

    How can one convert his black money into white using KVP?

    if i invest less than Rs. 100000 (now) which doesnt requie pan to b disclosed then i cannot claim its deduction in 80C as d invested amt is out of unaccounted money. Then i cannot recognise d intt received as my income in books as d invested fund was also not accounted. how would it convert to white then?

    Umesh sir please throw light on this.

  4. sekaran says:

    If the limit for PAN is 50k then invest 49.9 k. If your Bank int limit for TDS is 5 k then make several smaller deposits attracting interest of 4.9k.THE CHIEF PROBLEM IS MULTIPLE PAN NUMBERS,DUBIOUS AADHAR CARDS, MULTIPLICITY OF ACCOUNTS, BENAMIS ETC ETC.INDIANS NEED NOT BE TAUGHT THE TRICK.THE MARWARIS INVENTED IT FIRST AND THE HONEST TAX PAYER LEARNT IT FROM THEM, BECAUSE THERE WAS AND THERE IS NO LAW ENFORCEMENT!
    ESPECIALLY IN THE POST OFFICES THERE IS NOT A SINGLE WAY OF KNOWING AT ANY TIME HOW MANY DEPOSITS AN INDIVIDUAL HAS! IN SUCH A SITUATION BLACK MONEY CIRCULATES WILDLY IN DIFFERENT LOCALITIES OF THE INDIAN POSTS FOR THE SAME INDIVIDUAL.ONLY WHEN THERE IS A FOOL PROOF PROPER COMPUTERISATION CORRUPTION CAN BE STOPPED.THEREFORE THE KISAN VIKAS PATRIKA IS CERTAINLY AN OFFICIAL WAY TO STASH AWAY UNACCOUNTED MONEY.MR JAITLEY CAN DO NOTHING ABOUT IT.HE IS ONLY SHOWING A WAY TO THE CORRUPT PERSON WHAT TO DO WITH THEIR MONEY. AS HE IS ALREADY THE RICHEST MP OF THE BJP HE COULD NOT CARE, LESS MODI OR NO MODI. WHAT TO TALK OF BRINGING BACK BLACK MONEY FROM ABROAD!! PLEASE GRIN AND BEAR IT.

  5. jai says:

    Whether black money becomes white govt will get benefitted as money will come into circulation n the money can be used by govt should introduce vdis schemes n curb out black money slowly

  6. Sandeep says:

    Hi,

    I believe we have missed the basic mute point here in terms of KYC guidelines. The guidelines mentioned for PAN disclosure is teh same for all financial instruments.

    Hence this cannot be termed as a tool for Black Money. Further its my belief that if any government plans to increase financial inclusion in the country it has to offer schemes which are easily aceesible to people of the country. The Post office network offers an unparrallel distribution network throughout the country which needs effective utilisation.

    The KVP provides a great channel to all and sundry especially the small savers and housewives to channel small amounts to effective use. In the new avatar the KVP can be encashed midway plus can be used as security for availing loans adds to the attractiveness of the scheme.

    TDS and annual interest accreditions discourage small investors, thus in such a scenario the idea of non applicability of TDS is a wide decision. If a savvy investor parks huge amounts of money in these schmes the same can be easily known to the IT department through the AIR’s being required to file with the tax authorities.

    To conclude duplicacy of investment avenues might not hurt the economy, the need of the day is financial inclusion and all steps in the direction are welcome.

  7. adv malpani says:

    KISAN VIKAS PATRA SHOULD BE MADE NAME BEARING .IT CAN BE TRANSEFERABLE WITH APPLICATION TO POST OFFICE.APPLICANT SHOULD BE KYC COMPLIED .ONE CAN BE ALLOWED TO HOLD THE CERTIFICATES JOINTLY WITH NOMINATION FACILITY.APPLICATION FOR AMOUNT MORE THAN 50000-00 SHOULD BE BY CHEQUE ONLY

  8. robin says:

    The scheme is good for general Public,but at the present time it seems like that government wants to save that peoples’ interest those having Black Money in their Swiss Bank Account. Because recently government announced the name of Swiss Bank Account Holders, Therefore it seems only from the view point of a Clever Politics Strategy Of BJP government.

  9. Akshay Jain says:

    Dear Mr Umesh,

    Thanks a lot for discussing this article in detail. As PAN is important for investment of more than Rs 50000/- , the I.T.Department will be able to trace the investment if made in huge amount & further if that’s deposited in cash or otherwise being black money I don’t find any issues to trace the investor & moreover to have a eye on black money issue as discussed by you. Though Few person will take advantage of this but that will be restricted to only Rs 50000/-.

    I personally feel that this is very positive step to safeguard the money of general public & moreover the deposits with the government will bounce many times which can be used in the development of our country.

    All the above discussion is my personal opinion.

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