Bonus recived on maturity of kgid policies

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Kandula Amarnadh

Kandula Amarnadh (Querist)
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22 June 2015 What is KGID policy and the tax treatment on amount received as bonus on Maturity of KGID policy.

Asha Kanta Sharma

Asha Kanta Sharma

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18 July 2024 The term "KGID policy" does not have a widely recognized meaning in the context of insurance or financial products. It could be a specific term used by a particular institution or may be a typo or an abbreviation that is not commonly known.

However, assuming you meant "Kisan Vikas Patra" (KVP) policy, which is a savings scheme operated by the Government of India, I'll provide information based on that assumption. If your query pertains to another type of policy or scheme, please provide more details for a more accurate response.

### Kisan Vikas Patra (KVP) Policy:

1. **Overview:**
- Kisan Vikas Patra (KVP) is a savings scheme offered by the Government of India, primarily targeted towards rural investors.
- It doubles the invested amount in a specified period (currently around 124 months or 10 years).

2. **Tax Treatment on Bonus (Interest):**
- The interest earned on KVP is taxable under the Income Tax Act, 1961.
- The tax treatment depends on whether the interest accrues each year or is received at maturity:
- **Accrual Basis:** If the interest is accrued every year but reinvested (not received), you must declare it as income in your annual tax returns and pay tax accordingly.
- **Maturity Basis:** When the KVP matures and you receive the amount, the interest received along with the principal is taxable as per your applicable income tax slab rates.

3. **Tax Deduction at Source (TDS):**
- TDS may be deducted on the interest accrued if it exceeds Rs. 10,000 in a financial year. The TDS rate is 10% if PAN is furnished; otherwise, it is 20%.

4. **Investment and Maturity:**
- The investment in KVP qualifies for deductions under Section 80C of the Income Tax Act, subject to the overall limit of Rs. 1.5 lakh per financial year.
- The amount received on maturity (including the interest accrued) is fully taxable, and TDS may apply as mentioned above.

### Conclusion:

Ensure you correctly identify the specific policy or scheme you are referring to (whether KVP or another). The tax treatment can vary based on the policy type, investment period, and specific provisions of the Income Tax Act applicable at the time of maturity or withdrawal. It’s advisable to consult with a tax advisor or financial expert for personalized advice based on your individual circumstances.