National Savings Certificate (NSC) – Benefits, Eligibility, Interest Rate 

What is National Saving Certificate (NSC)?

National Saving Certificates (NSC) are a type of fixed-income investment scheme offered by the Government of India. They are designed to encourage individuals to save money and provide them with a safe and secure investment option. NSCs are issued by the Department of Post, which operates under the Ministry of Communications.

Why Should Invest in National Saving Certificate?

There are several reasons why individuals may consider investing in National Saving Certificates (NSCs):

1. Safe and Secure Investment: NSCs are backed by the Government of India, making them a secure investment option. The principal amount invested and the interest earned are guaranteed by the government.
2. Fixed Interest Rate: NSCs offer a fixed interest rate, which is determined by the government and revised periodically. This fixed rate provides certainty and stability in returns, especially for individuals looking for a predictable income stream.
3. Tax Benefits: The amount invested in NSCs qualifies for a tax deduction under Section 80C of the Income Tax Act, up to a specified limit. This allows individuals to reduce their taxable income and potentially lower their tax liability.
4. Compound Interest: The interest on NSCs is compounded annually, providing the benefit of compounding over the investment tenure. This can help grow the investment amount significantly over time.
5. Flexibility in Investment Tenure: NSCs are available in two maturity periods: five years and ten years. This allows individuals to choose the tenure that suits their financial goals and investment horizon.
6. Accessibility: NSCs can be purchased directly from designated post offices across India. They are widely available, making them accessible to a large number of investors.
7. Nomination Facility: NSCs provide a nomination facility, allowing investors to designate a nominee who will receive the proceeds of the investment in case of the investor’s death. This ensures that the investment is smoothly transferred to the intended beneficiary.
8. Diversification: NSCs can be a part of a diversified investment portfolio. By adding NSCs to their portfolio, investors can balance their risk exposure and potentially earn stable returns from a government-backed instrument.

It’s important to consider individual financial goals, risk tolerance, and investment preferences before deciding to invest in NSCs or any other financial instrument. It’s advisable to consult with a financial advisor or conduct thorough research to make informed investment decisions that align with personal financial circumstances.

Who Should Invest in National Saving Certificate?

1. Risk-Averse Investors: NSCs are ideal for risk-averse investors who prioritize capital protection and steady returns. As NSCs are backed by the Government of India, they offer a high level of security, making them a preferred choice for conservative investors.
2. Individuals with Fixed Income Requirements: NSCs can be suitable for individuals who rely on fixed income for their regular expenses. The fixed interest rate and regular compounding of NSCs provide a predictable income stream, which can help meet financial obligations.
3. Individuals Seeking Tax Benefits: Investing in NSCs offers tax benefits under Section 80C of the Income Tax Act. If individuals are looking to reduce their taxable income and lower their tax liability, NSCs can be a viable option to consider.
4. Long-Term Savers: NSCs have a fixed tenure of either five or ten years. They can be attractive for individuals who have long-term savings goals, such as retirement planning, children’s education, or purchasing a house. By investing in NSCs, individuals can lock in their savings for a specific period and earn competitive returns.
5. Small Savers: NSCs have a relatively low minimum investment requirement, making them accessible to small savers who may not have a significant amount of funds to invest. The affordability factor makes NSCs an attractive option for those who want to start building a savings portfolio.
6. Individuals Looking for Government-Backed Investments: NSCs are backed by the Government of India, offering a high level of safety and credibility. This can be appealing to individuals who prefer investing in government-backed instruments to mitigate investment risks.

Benefits of National Saving Certificate

Investing in National Saving Certificates (NSCs) offers several benefits to investors. Here are some key advantages of NSCs:

1. Government Backing: NSCs are backed by the Government of India, providing a high level of safety and security for investors. The principal amount invested and the interest earned are guaranteed by the government.
2. Fixed Interest Rate: NSCs offer a fixed interest rate, which is determined by the government and revised periodically. This fixed rate provides certainty and predictability in returns throughout the investment tenure.
3. Tax Benefits: The amount invested in NSCs qualifies for a tax deduction under Section 80C of the Income Tax Act, up to a specified limit. This reduces the taxable income of the investor and potentially lowers their overall tax liability.
4. Compound Interest: The interest on NSCs is compounded annually, allowing investors to benefit from compounding over the investment tenure. This can help grow the investment amount significantly over time.
5. Accessibility: NSCs are widely available and can be purchased directly from designated post offices across India. This accessibility makes it convenient for individuals to invest in NSCs.
6. Tenure Options: NSCs are available in two maturity periods: five years and ten years. This provides flexibility for investors to choose the tenure that aligns with their financial goals and investment horizon.
7. Nomination Facility: NSCs provide a nomination facility, allowing investors to designate a nominee who will receive the proceeds of the investment in case of the investor’s death. This ensures smooth transfer of the investment to the intended beneficiary.
8. No Market Fluctuations: NSCs are not subject to market fluctuations, unlike some other investment options such as stocks or mutual funds. This stability can be attractive to risk-averse investors who seek steady and reliable returns.

Tax Benefits of National Saving Certificates

Investing in National Saving Certificates (NSCs) in India provides tax benefits under Section 80C of the Income Tax Act. Here are the key tax benefits associated with NSCs:

1. Tax Deduction: The amount invested in NSCs qualifies for a tax deduction up to a specified limit under Section 80C of the Income Tax Act.The maximum deduction limit under Section 80C was ₹1.5 lakh per financial year. This means that individuals can claim a deduction for the amount invested in NSCs, subject to this limit, from their taxable income.
2. Accumulated Interest: The interest accrued on NSCs is deemed to be reinvested and qualifies for a tax deduction under Section 80C. However, it is important to note that this tax benefit is available only at the time of maturity and not on an annual basis.
3. Tax on Interest: While the interest earned on NSCs is taxable, it is deemed to be reinvested and qualifies for a deduction under Section 80C. However, it’s important to note that the accrued interest is subject to tax upon maturity, as per the individual’s tax slab rate in the year of maturity.
4. Tax-Exempt Maturity Amount: The maturity amount of NSCs, which includes both the principal amount and the accumulated interest, is tax-free. This means that when the NSC matures, the investor receives the full maturity amount without any tax implications.
5. Cumulative Tax Benefits: The tax benefits associated with NSCs can be accumulated with other eligible investments and expenditures under Section 80C, such as life insurance premiums, employee provident fund (EPF) contributions, tuition fees, etc. This allows individuals to optimize their tax savings by utilizing the overall limit of ₹1.5 lakh available under Section 80C.

It’s important to note that tax laws and regulations are subject to change, and the specific tax benefits associated with NSCs may vary over time. Therefore, it’s advisable to consult with a tax professional or refer to the latest information provided by the Income Tax Department or other official sources to understand the current tax implications and benefits of investing in NSCs.

Eligibility for National Saving Certificate

1. Citizenship: NSCs are available to Indian citizens only. Non-resident Indians (NRIs) and foreign nationals are not eligible to invest in NSCs.
2. Age: There is no specific age restriction for investing in NSCs. Both minors and adults can invest in NSCs.
3. Investment Limit: There is no maximum investment limit for NSCs. However, the minimum investment amount is typically set at ₹1000, although it may vary and should be confirmed with the post office or financial institution.
4. Mode of Purchase: NSCs can be purchased directly from designated post offices across India. Some authorized banks may also offer NSCs, but it’s advisable to check with the specific bank for availability.
5. Joint Ownership: NSCs can be purchased in an individual’s name or jointly with another individual. Joint ownership is allowed for specific relationships, such as spouses, parents, or siblings.
6. Know Your Customer (KYC) Norms: Individuals need to comply with the KYC norms, which include providing proof of identity (such as Aadhaar card, passport, or voter ID) and proof of address (such as Aadhaar card, utility bill, or bank statement).

Documents Required for NSC

• Photograph – Two photographs
• Address proof – Bank statement, Electricity bill, Passport, Phone bill, or Bank statement
• Identity proof –  Such as a Passport, Permanent account number (PAN) card, Driver’s license, Senior citizen ID.

Maturity

• The deposit shall mature on completion of 5 years from the date of the deposit.

Interest Rates

• 7.7 % compounded annually but payable at maturity

How to Open NSC Online

NSC can be open through Post office internet banking

Step 1 :- Login into Dop internet banking

Step 2 :- General Services->Service Requests->New Requests

Step 3 :- Click on NSC account – click on NSC account Open a NSC account and KVP Account to open a KVP account.

Step 4:- Enter Amount for which NSC to be opened minimum is Rs 1000 and in multiple of -> 100) .

Step 5:- Select the Debit Account linked PO Saving Account

Step 6:- Click on ‘Click Here’ to read terms and conditions and accept terms and conditions .

Step 7:- Submit online

Premature Closer

NSC may not be prematurely closed before 5 years except the following conditions : –

​(i) On the death of a single account, or any or all the account holders in a joint account

(ii) On forfeiture by a pledgee being a Gazetted officer.

(iii) On order by court.

FAQs

Q. What is a Meaning National Saving Certificate (NSC)?

A. NSC is a fixed-income savings scheme offered by the Government of India. It is a secure investment option backed by the government.

Q. What is the Minimum and Maximum Investment Amount for NSCs?

A. The minimum investment amount for NSCs is typically set at ₹1000, although it may vary. There is no maximum investment limit.

Q. Where Can I Purchase NSCs?

A. NSCs can be purchased directly from designated post offices across India. Some authorized banks may also offer NSCs, but it’s advisable to check with the specific bank for availability.

Q.What is the Tenure of NSCs?

A. NSCs are available in maturity periods of five years.

Q.What are the Tax Benefits of NSCs?

A. The amount invested in NSCs qualifies for a tax deduction under Section 80C of the Income Tax Act, up to a specified limit. The interest earned is taxable, but the investment and interest are exempt from wealth tax.

Q. Can NSCs be Prematurely Encashed?

A. Yes, NSCs can be prematurely encashed under specific circumstances, such as in the case of the death of the certificate holder or on the order of a court. However, premature closure may result in a reduced interest payout.

Q. Is there a Nomination Facility Available for NSCs?

A. Yes, NSCs provide a nomination facility, allowing investors to designate a nominee who will receive the proceeds of the investment in case of the investor’s death.

Q. Can NRIs Invest in NSCs?

A. No, NSCs are available only to Indian citizens. Non-resident Indians (NRIs) and foreign nationals are not eligible to invest in NSCs.