National Savings Certificates is a saving scheme under Indian post-offices. These certificates are highly secured and are designed for salaried employees and individuals doing business. NSC is a ‘fixed period’ saving scheme. . Interest on NSC is calculated annually. There are two different issues of NSCs i.e. NSC- VIII issue and NSC IX Issue.
(I) Interest on National Savings Certificates
NSC (VIII Issue)
NSC (IX Issue)
Lock in Period
As of today (for quarter January to March 2019) NSC gets 8% interest compounded annually.
NOTE: The Government discontinued NSC (IX Issue) in December 2015. Currently, only NSC (VIII Issue) is open for subscription.
National Savings Certificates can be purchased individually, jointly and on behalf of minors.
(II) Eligibility to open account under NSC Scheme?
NSC account can be open from the following persons:
- Any Indian resident can invest in this scheme
- NSC scheme is not eligible for Non-Residents
- Investment can be done jointly with another adult or can be purchase on behalf of a minor
- Trusts and HUF’s are also not eligible to invest in VIII issue of NSC.
- Nomination facility is also available under NSC scheme
Note: NSCs are issued by the post office. You can buy them from any branch of the Indian postal service.
Investment limit under NSC
No Limit for Investment in National Saving Certificates.
(III) Tax Benefits of investment under NSC
- Investment in National Savings Certificate qualifies for Deduction Section 80C of the Income Tax Act up to Rs. 1,50,000. Accrued interest on NSC also qualifies for deduction u/s 80C.
- Interest received under NSC is taxable. Under this scheme interest is not paid to the investor but instead accumulates in the account, each year’s interest is considered reinvested in the NSC. This is allowed as a fresh deduction under Sec 80C and making it tax-free.
- The final interest on NSC on maturity is not allowed as tax deduction as it does not get re-invested, but is paid back with the interest of the earlier years and the capital amount to the investor.
- Interest earned from NSC is shown under Interest from other sources.
- TDS will not deducted.
Let us understand with an illustration: Suppose an investor buys Rs 40,000 worth of NSCs in January 2019. One year later, the investment would have earned an interest of about Rs 3,600. The investor can claim deduction for this Rs 3,600 for the year 2019-20 along with the invested amount. In the next financial year, the investment would earn about Rs 4,200 in interest. This can be claimed as a deduction in 2020-21. This is allowed as a fresh deduction under Section 80C.
The final interest on NSC on maturity is not allowed as tax deduction as it does not get re-invested.
(IV) Financial benefits of investing in NSC
National Savings Certificates is the secure saving scheme of investment, which comes with attractive benefits. Some of the benefits offered by National Savings Certificates:
- Attractive Interest Rates: National Savings Certificate gives an attractive interest on your savings. You can earn interest up to 8.8%.
- Returns: Assured returns are there under National Savings Certificates for investment of 5 to 10 years.
- Minimum/maximum limit of investments: You can invest as minimum as Rs.100. However, there is no maximum limit for investment under National savings certificates.
- Availability of Loan against NSCs: Investor can use National Savings Certificates as mortgage to get loans from banks.
- NSC Certificate Transfer: NSCs can be transferred from one person to another. If the certificate holder proposes to transfer.
- Low Risk: Investment in NSC have low risk
(V) Procedure to invest in NSC
Currently, you can purchase and invest in NSC only through offline mode from any post office situated in India. Click Here to locate your post office.
- Get the form for NSC and fill all the requisite details in the form
- Submit the documents required for investing in NSC
- Fill the nomination details
- Make the payment through cash, cheque or demand draft.
- Once all the verification is completed, the concerned post master will issue the NSC with the desired amount.
(VI) Documents required to open account under NSC Scheme
A filled application form along with the following documents are required to invest in NSC :
1. Original identity proof for verification
- PAN card
- Voter ID card
- Driving licence
- Government ID card
- Senior citizen ID card
2. Address Proof
- Telephone bill
- Electricity bill
- Bank Statement with Cheque
- Certificate/ ID card issued by Post office