Kisan Vikas Patra: Is interest on KVP eligible for deduction under section 80TTB? Currently it offers 7.5% interest per annum and the tenure is 9 years and 7 months i.e. 115 months
Kisan Vikas Patra (KVP) is a small savings scheme offered by the government and the USP of the scheme is that it doubles the invested money. The interest rate of the scheme is reviewed by the government every quarter. However, once the investment is done, the interest rate remains the same for the investment duration.For the June-September 2023 quarter, the KVP scheme is offering an interest rate of 7.5% per annum. The investment amount currently doubles in 115 months, i.e., 9 years and 7 months. Though the interest earned is payable to the investor at the time of maturity, however, it is taxable in the hands of an individual.
Income tax laws do not allow individuals below 60 years any deduction for interest earned from KVP. But can a senior citizen claim deduction on interest earned on KVP under section 80TTB of the Income Tax Act, 1961?
Section 80TTB allows a senior citizen to claim deduction on the interest earned from deposits held with bank, post office and co-operative societies. This includes interest earned from savings bank accounts, bank fixed deposits, Senior Citizens Savings Scheme, post office time deposits, post office monthly income scheme, and so on. A maximum deduction of Rs 50,000 can be claimed under Section 80TTB on all the interests earned from deposits.
ET Wealth Online spoke with a few tax experts to find out if senior citizens can claim tax deduction on KVP interest earned. What we found out was that there is no clarity among the experts; here’s what they had to say.
No deduction on interest from KVP
Naveen Wadhwa, DGM, Taxmann, a Delhi based book publishing company: “By nature KVP is more likely falling more in the category of bonds than deposits. This is the reason why KVP was excluded from the 80TTB deduction by the government. Hence, a senior citizen cannot claim deduction under Section 80TTB on the interest earned on KVP.”Abhishek Soni, CEO, Tax2Win.in – a tax filing platform: “The income tax exemption under section 80TTB is not available for interest earned from Kisan Vikas Patra (KVP).”
CA Manas Chugh, head, regulatory services, Osgan Consultants, a Delhi based tax and business consultancy company: “The Government doesn’t offer any deduction on the interest accrued on the KVP yearly under Section 80TTB. As the interest shall be received at maturity, the individual has to include the interest accrued on yearly basis under Income from other sources.”
Tax deduction is available on interest earned from KVP
Milin Bakhai, Associate Partner, Direct Taxation, N.A. Shah Associates, a Mumbai based CA firm: “Interest accrued under KVP is also eligible for deduction under section 80TTB, subject to overall limit of Rs 50,000 per financial year.Suresh Surana, founder, RSM India, a tax, audit and consultancy company: “ Kisan Vikas Patra is a certificate scheme from the post office, any interest incurred on the same would be eligible to be claimed as deduction under section 80TTB of Income Tax Act.”
How to show interest from KVP in ITR form?
The interest from KVP is to be shown under the head income from other source. There are two methods of calculating interest income from KVP.“Income from other sources can be taxed based on either accrual or actual paid basis at the option of the taxpayer. The same is also applicable to interest earned under the Kisan Vikas Patra (KVP) scheme,” said Sandeep Bajaj, an Advocate practising in Supreme Court of India.
What should you do?
As seen above, there is no clarity among even tax experts regarding deduction under Section 80TTB for interest earned on KVP. Hence, if you are claiming a deduction while filing ITR, then you must be prepared to receive an income tax notice.Don’t miss out on ET Prime stories! Get your daily dose of business updates on WhatsApp. click here!
This story originally appeared on: India Times - Author:Faqs of Insurances
