National Savings Certificate: Everything You Need to know

National Savings Certificates, also known as NSCs, are a popular investment option in India. These certificates are issued by the Government of India through the Department of Posts and are a low-risk, fixed-income investment option. NSCs are designed to encourage savings and provide a reliable investment option for individuals who are risk-averse. They offer a guaranteed rate of return and are tax-free, making them an attractive investment option for those looking to save on taxes as well. In this article, we will discuss the different types of National Savings Certificates, their features, benefits, and limitations, and how you can invest in them.

Types of National Savings Certificates

There are two types of National Savings Certificates that are currently available in India. Let’s take a closer look at each type:

NSC VIII Issue:

The NSC VIII Issue is the most commonly known type of National Savings Certificate. This certificate has a maturity period that is of 5 years and offers an interest rate of 6.8% per annum compounded annually. The minimum investment amount is Rs. 100 and there is no maximum investment limit. The interest earned on the NSC VIII Issue is taxable, but the principal amount invested is eligible for tax benefits which is under Section 80C of the Income Tax Act.

 NSC IX Issue:

The NSC IX Issue is a new type of National Savings Certificate that was introduced in 2020. This certificate has a maturity period of 10 years and offers an interest rate of 6.9% per annum compounded annually. The minimum investment amount is Rs. 1,000, and there is no maximum investment limit. The interest earned on the NSC IX Issue is taxable, but the principal amount invested is eligible for tax benefits under Section 80C of the Income Tax Act.

Both types of NSCs are available in denominations of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000, and Rs. 10,000, and can be purchased from any post office across India. It is important to note that the interest rate offered on NSCs is subject to change from time to time, and investors should check the prevailing rates before making any investment decisions.

Advantages of Investing in NSC

Investing in National Savings Certificates (NSC) can have several advantages for individuals looking for a safe investment option. Here are some of the advantages of investing in NSC:

1. Low-risk investment: NSC is a government-backed investment option that provides a guaranteed return on investment. It is a low-risk investment option, making it a suitable choice for risk-averse investors.
2. Tax benefits: The investment amount in NSC qualifies for a tax deduction of up to Rs. 1.5 lakh which is under Section 80C of the Income Tax Act.
3. Fixed interest rate: NSC offers a fixed interest rate, which remains unchanged throughout the investment period. This means that investors can accurately calculate the amount they will earn at maturity.
4. Liquidity: NSC certificates can be easily cashed before the maturity period in case of an emergency. However, in such cases, the investor may have to pay a penalty and the interest rate will be adjusted accordingly.
5. No limit on investment: There is no upper limit on the amount that can be invested in NSC. This means that individuals can invest as much as they want to get a higher return on investment.
6. Easy accessibility: NSC can be easily purchased from any post office across India, making it a convenient investment option for individuals in rural and remote areas.

Overall, NSC is a suitable investment option for individuals looking for a safe and guaranteed return on investment, while also enjoying tax benefits.

Tax Benefits of NSC

National Savings Certificate (NSC) is a popular investment option offered by the Indian Government. NSC is a fixed-income investment scheme that provides tax benefits to the investors. The tax benefits of NSC are as follows:

1. Tax deduction under section 80C: The amount invested in NSC is eligible for tax deduction that is under section 80C of the Income Tax Act. The maximum amount that can be claimed as a deduction is Rs. 1.5 lakhs in a year.
2. No tax on interest: The interest earned on NSC is taxable, but the interest is added to the investor’s income and taxed as per the income tax slab applicable to the investor. However, the interest earned on NSC is eligible for tax exemption that is under section 80C up to a maximum of Rs. 1.5 lakhs in a financial year.
3. Tax exemption on maturity: The maturity amount of NSC is exempt from tax. The maturity amount is the amount invested plus the interest earned during the tenure of the investment.
4. No TDS deduction: TDS (Tax Deducted at Source) is not deducted on the interest earned on NSC. The interest earned is added to the investor’s income and taxed as per the income tax slab applicable to the investor.

It is important to note that NSC has a lock-in period of five years, and premature withdrawals are not allowed. Moreover, the interest earned on NSC is compounded annually, which means that the longer the investment tenure, the higher the return.

Eligibility Criteria for NSC

The eligibility criteria for investing in National Savings Certificate (NSC) in India are as follows:

1. Citizenship: NSC is available only to Indian citizens. Non-resident Indians (NRIs) and persons of Indian origin (PIOs) are not eligible to invest in NSC.
2. Age: There is no age limit for investing in NSC. Any individual, including minors, can invest in NSC.
3. Number of accounts: There is no limit on the number of NSC accounts that can be opened by an individual. However, the total investment in NSC should not exceed the maximum limit of Rs. 1.5 lakhs in a financial year.
4. Mode of investment: NSC can be purchased through cash or cheque. The investment can be made by an individual, or jointly with another individual.
5. Tenure: The minimum tenure of NSC is 5 years, and the maximum tenure is 10 years. The investment can be made in any of these tenures.
6. Premature withdrawal: NSC does not allow premature withdrawals, except in specific cases such as the death of the investor, forfeiture by a pledge or order of court, etc.

It is important to note that NSC is a low-risk investment option offered by the Indian government. The interest rate on NSC is reviewed and revised by the government periodically. It is recommended to check the latest interest rates before investing in NSC.

How to Purchase NSC

National Savings Certificate (NSC) can be purchased through any post office in India that offers NSC services. The following steps can be followed to purchase NSC:

1. Visit the nearest post office that offers NSC services: To purchase NSC, you need to visit the post office that offers NSC services. You can locate the nearest post office by visiting the India Post website.
2. Fill up the NSC application form: The NSC application form can be obtained from the post office or downloaded from the India Post website. The form needs to be filled with details such as name, address, PAN number, investment amount, and investment tenure.
3. Submit the NSC application form along with the investment amount: The filled NSC application form needs to be submitted along with the investment amount through cash or cheque. The post office will issue a certificate of investment after verifying the details.
4. Keep the NSC certificate safe: The NSC certificate is an important document and needs to be kept safely. The certificate contains details such as the investment amount, investment tenure, interest rate, and maturity date.
5. Collect the interest and maturity amount: The interest earned on NSC is added to the certificate every year. On maturity, the total amount, including the principal and interest earned, can be collected from the post office.

It is important to note that NSC has a lock-in period of five years, and premature withdrawals are not allowed. Moreover, the interest earned on NSC is compounded annually, which means that the longer the investment tenure, the higher the return. It is recommended to check the latest interest rates before investing in NSC.

FAQ’s

Is NSC a good investment?

NSC is a good investment option for those looking for a low-risk and secure investment with a guaranteed return. It is a good choice for risk-averse investors who do not want to expose their money to market fluctuations. 

What is a 5 year National Saving Certificate?

A 5 year National Savings Certificate (NSC) is a type of fixed-income savings instrument offered by the Indian government. As the name suggests, this certificate has a maturity period of 5 years, during which the investment earns a fixed rate of interest compounded annually. 

Conclusion: National Saving Certificate

National Savings Certificate (NSC) is a popular investment option offered by the Indian government to encourage savings and promote a savings culture among the citizens. NSC is a low-risk investment option that offers guaranteed returns, and the investment amount is fully secured by the government.

NSC can be purchased through any post office in India that offers NSC services. The investment tenure for NSC ranges from 5 to 10 years, and premature withdrawals are not allowed. The interest earned on NSC is compounded annually, which means that the longer the investment tenure, the higher the return.

The nomination facility is available for NSC investment, which allows the investor to nominate a person who will receive the proceeds of the NSC investment in case of the investor’s death.

It is recommended to check the latest interest rates before investing in NSC. NSC is suitable for risk-averse investors who want to earn guaranteed returns on their savings. However, it is important to note that the returns from NSC may not keep pace with the inflation rate, which means that the real value of the investment may erode over time.

Overall, NSC is a good investment option for those who want a safe and low-risk investment option with a guaranteed return. It is important to assess your financial goals and risk profile before investing in NSC or any other investment option.