A Secure Investment Avenue for Financial Growth
The National Savings Certificate (NSC) scheme is a widely acclaimed investment instrument in India, offering individuals a secure and reliable way to save money while earning attractive returns. Established by the Government of India, the NSC scheme aims to encourage regular savings and foster a culture of financial discipline among individuals.
What is the National Savings Certificate Scheme?
The National Savings Certificate Scheme is a fixed-income investment scheme designed for Indian residents. It is offered by the Department of Posts, Ministry of Communications, Government of India. Under this scheme, individuals can invest a specified amount for a fixed term, typically five or ten years, and earn a guaranteed return on their investment.
| Interest Rate | 7.7% per annum |
| Minimum Investment | Rs.1,000 |
| Lock-in Period | 5 years |
| Risk Profile | Low-risk |
| Tax Benefit | Up to Rs.1.5 lakh under Section 80C |
Who Can Benefit from the National Savings Certificate Scheme?
The National Savings Certificate (NSC) Scheme is a versatile investment instrument that can benefit a wide range of individuals looking for secure and reliable ways to grow their savings. Whether you are a risk-averse investor, a taxpayer seeking tax-saving opportunities, or someone aiming to achieve long-term financial goals, the NSC scheme offers several advantages.
Risk-Averse Investors: If you prioritize the safety of your investments and seek a guaranteed return, the NSC scheme is an ideal option. Backed by the Government of India, NSCs provide a risk-free investment avenue with assured returns. The principal amount invested, along with the accrued interest, is protected, offering peace of mind to risk-averse investors.
Individuals Looking for Fixed-Income Investments: NSCs offer attractive interest rates that are typically higher than those provided by regular savings accounts. If you prefer steady and predictable income from your investments, the NSC scheme can be an excellent choice. The fixed lock-in period ensures a stable income stream throughout the investment tenure.
Taxpayers: NSC investments are eligible for tax benefits under Section 80C of the Income Tax Act. By investing in NSCs, individuals can claim deductions up to a specified limit from their taxable income. This makes NSCs a valuable tool for tax planning and optimizing tax liability.
Long-Term Savers: The NSC scheme encourages long-term savings by imposing a fixed lock-in period of either five or ten years. This feature promotes financial discipline and discourages premature withdrawals. If you have long-term financial goals, such as saving for a child’s education, buying a house, or planning for retirement, NSCs can serve as a reliable investment option to achieve these objectives.
Individuals Seeking Accessibility: One of the key advantages of NSCs is their wide accessibility. These certificates can be purchased at any post office across India, making them easily available to individuals in both urban and rural areas. The accessibility factor ensures that people from all walks of life can participate in the NSC scheme and benefit from its features.
Features & Benefits of NSC
Fixed Income: The NSC scheme offers a guaranteed return currently set at a rate of 7.7% for investors. Historically, NSCs have provided higher returns compared to Fixed Deposits (FDs).
Types: The NSC scheme consists of two types of certificates – NSC VIII Issue and NSC IX Issue. However, the NSC IX Issue was discontinued by the government in December 2015, leaving only the NSC VIII Issue open for subscription at present.
Tax Saver: NSC is recognized as a government-backed tax-saving scheme, allowing investors to claim deductions of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.
Start Small: Investors can begin with a modest initial investment amount as low as Rs. 1,000 (or in multiples of Rs. 100) and gradually increase the investment as per their financial capacity.
Interest Rate: The current rate of interest for NSC is 7.7% per annum for Q1 FY 2023-24. The government revises the interest rate quarterly. The interest is compounded annually but becomes payable at the time of maturity.
Maturity Period: NSC has a fixed maturity period of five years, providing investors with a clear timeline for their investment.
Access: NSCs can be conveniently purchased from any post office by completing the necessary documentation and undergoing the Know Your Customer (KYC) verification process. Additionally, transferring the certificate from one post office branch to another is a straightforward process.
Loan Collateral: Banks and Non-Banking Financial Companies (NBFCs) accept NSCs as collateral or security for secured loans. To facilitate this, the concerned postmaster places a transfer stamp on the certificate and transfers it to the lending institution.
Power of Compounding: The interest earned on NSC investments is compounded and reinvested by default. However, it is important to note that the returns may not outpace inflation.
Nomination: Investors have the option to nominate a family member, including minors, as a nominee for the NSC. In the unfortunate event of the investor’s demise, the nominee can inherit the investment.
Corpus after Maturity: Upon maturity, investors receive the entire maturity value. As NSC payouts are not subject to Tax Deducted at Source (TDS), the investor is responsible for paying the applicable taxes on the maturity amount.
Premature Withdrawal: Generally, premature withdrawal from the NSC scheme is not allowed. However, exceptions are made in cases such as the death of the investor or if there is a court order permitting early exit.
Eligibility Criteria for National Savings Certificate Scheme
Indian Residents: The National Savings Certificate (NSC) Scheme is open to all Indian residents, including individuals, Hindu Undivided Families (HUFs), and trusts.
Minimum Age Requirement: The minimum age for investment in the NSC scheme is 18 years. Individuals below this age are not eligible to invest.
No Upper Age Limit: There is no upper age limit specified for investing in NSC. Individuals of any age can participate in the scheme.
Non-Resident Indians (NRIs): Non-Resident Indians (NRIs) are not eligible to invest in the NSC scheme. The scheme is exclusively designed for Indian residents.
Hindu Undivided Families (HUFs): Hindu Undivided Families (HUFs) are also not eligible to invest in the NSC scheme. Only individual members of the HUF can invest in their capacity as individuals.
Investment Process
Application: To invest in NSCs, individuals need to visit their nearest post office and fill out the prescribed application form. The form requires personal details, such as name, address, and identity proof.
Investment Amount: The minimum investment amount for NSCs is INR 100, with no maximum limit. Individuals can invest in multiples of INR 100, making it flexible for investors with varying budgets.
Documentation: The applicant must provide identity proof, address proof, and other documents as specified by the post office. These documents ensure compliance with Know Your Customer (KYC) regulations and authenticate the investor’s identity.
Issuance of NSC: Once the application is processed, the post office issues the NSC certificate to the investor. The certificate contains vital details such as the investor’s name, investment amount, maturity date, and interest rate applicable.
Opening an NSC Account at the Post Office
Locate the Nearest Post Office: Identify the nearest Post Office branch that offers the National Savings Certificate (NSC) scheme. You can find this information through the official website of India Post or by visiting the nearest Post Office in person.
Obtain the Application Form: Request the NSC application form from the Post Office. Fill out the form accurately and completely. Ensure that all the required fields are duly filled, providing the necessary personal and financial details.
Submit the Application and Required Documents: Submit the filled application form along with the necessary documents. The documents typically include proof of identity, proof of address, and a recent passport-sized photograph. Acceptable documents may include Aadhaar card, PAN card, passport, voter ID card, driving license, and other government-issued IDs.
Make the Payment: Proceed to make the payment towards the NSC account. You can pay in cash, by cheque, or demand draft (DD), as per the Post Office’s accepted modes of payment. The minimum investment amount for NSC is Rs. 1,000 (or multiples thereof).
Acknowledgement: After the submission of the application form and payment, the Post Office will process your NSC account opening request. Upon successful processing, you will receive an acknowledgement for the same. This acknowledgement serves as proof of your investment in the NSC scheme.
Documents Required to Apply for NSC
When applying for an NSC (National Savings Certificate), investors need to submit the following documents:
NSC Application Form: Investors must fill out the prescribed NSC application form accurately and completely. This form is available at the post office where the NSC is being purchased.
Identification Proof: Investors are required to provide an original identification proof document for verification purposes. Acceptable identification proof documents include:
- Passport
- Permanent Account Number (PAN) Card
- Voter ID Card
- Driving Licence
- Senior Citizen ID Card
- Government-issued ID Card
Photograph: Investors must provide a recent passport-sized photograph that will be affixed to the NSC application form.
Address Proof: Proof of address is essential for KYC (Know Your Customer) compliance. Investors need to submit a valid address proof document, which may include:
- Electricity Bill
- Passport
- Telephone Bill
- Bank Statement (with a visible address)
- Cheque (with the investor’s address printed on it)
Maturity and Withdrawal
NSC investments mature after the completion of the lock-in period, which is either five or ten years, depending on the investor’s choice. At maturity, the investor can redeem the NSC certificate at the post office where it was initially purchased. The principal amount, along with the accrued interest, is paid to the investor upon redemption.
How to Request a Duplicate National Savings Certificate: If your original National Savings Certificate (NSC) is lost, stolen, destroyed, damaged, or mutilated, you can apply for a duplicate certificate by following these steps:
Obtain the Duplicate Savings Certificates Form: Visit the post office that issued the original NSC and request the Duplicate Savings Certificates form. This form is specifically designed for replacing lost or damaged NSC certificates.
Complete the Form: Fill out the Duplicate Savings Certificates form accurately and provide all the necessary information. The form will typically require the following details:
- Serial numbers, denominations, NSC issue, and other relevant information regarding the lost or damaged certificate(s).
- The purchase date of the certificates that need to be replaced.
- Clearly indicate the objective for filing a duplicate certificate and provide any additional details as required.
Submit the Form: Once the form is completed, submit it to the post office from where the original NSC was issued. Ensure that you attach any supporting documents, such as a copy of the police report (in case of theft) or any other relevant documents requested by the post office.
Verification and Processing: The post office will verify the information provided and process your request for a duplicate NSC certificate. This may involve additional checks and procedures to ensure the authenticity and validity of the application.
Issuance of Duplicate Certificate: Upon successful verification, the post office will issue a duplicate NSC certificate to replace the lost or damaged one. The duplicate certificate will contain the necessary information and will be valid as per the terms and conditions of the original certificate.
How to Show NSC Interest in Income Tax
When filing your income tax return (ITR), you have options to show the interest earned from National Savings Certificates (NSC). Here are the ways you can handle NSC interest for tax purposes:
Show NSC Interest under ‘Income from Other Sources’:
- You can include the interest earned from NSC under the category of ‘Income from Other Sources’ in your ITR.
- Calculate the total interest earned from NSC during the financial year and report it as income under this category.
- Ensure you accurately disclose the interest amount and any other required details while filing your ITR.
Claim Deduction for NSC Interest:
- Instead of showing the NSC interest as income, you have the option to claim a deduction for the interest earned.
- In this case, consider the entire interest income accumulated over the years as income in the last financial year.
- The interest earned in the last year should be considered as income and you can claim a deduction for the previous years’ interest amounts.
Do Not Claim Deduction or Show as Income:
- Alternatively, you can choose not to claim the NSC interest as a deduction or show it as income.
- In this scenario, all the interest earned will be treated as ‘Income from Other Sources’ in the last financial year.
- However, it’s important to consider that only the interest earned in the first four years will be eligible for deduction, while the interest earned in the last year will be counted as income.
National Savings Certificate (NSC) – Frequently Asked Questions
Is NSC Interest Taxable?
NSC interest is taxable under the category of “Income from Other Sources.” However, in the first four years, the interest is reinvested and can be claimed as a deduction under Section 80C of the Income Tax Act. It’s important to note that the interest earned in the fifth year is taxable as per the individual’s applicable income tax slab.
How to Withdraw NSC After Maturity?
To withdraw NSC after maturity, visit the nearest post office and submit a hand-written maturity claim along with the original NSC certificate, the identity slip received at the time of purchase, and an identity proof document. If the identity slip is available, the processing and payment will be done promptly.
What are the Tax Advantages of NSC?
NSC investments offer tax advantages under Section 80C of the Income Tax Act. Investors can claim deductions of up to Rs. 1.5 lakh on their NSC investments. Additionally, the annual interest earned on NSC assets is considered a fresh investment for tax purposes. TDS is not required on NSC, nevertheless, tax is required on interest earned.
How Many NSCs Can be Purchased?
There is no maximum limit on the number of NSCs that can be purchased. However, the minimum investment amount required for NSC is Rs. 1,000.
Can NSC be Cashed Out Before Maturity?
NSCs have a maturity period of five years. Generally, premature encashment is not allowed. However, in exceptional circumstances such as the investor’s untimely death or as directed by a court order, an NSC can be cashed out before maturity.
