The National Savings Certificate (NSC) is a secure investment option provided by the Government of India through post offices. It offers reliable returns and significant tax benefits under Section 80C of the Income Tax Act, making it a popular choice among risk-averse investors.
A Government of India initiative, the National Savings Certificate (NSC) is a fixed-income investment scheme that you can open easily with any post office.
What is National Savings Certificate
The National Savings Certificate (NSC) is a fixed-income investment scheme that you can open with any post office branch. This is an initiative by the Government of India and encourages subscribers – mainly small to mid-income investors – to invest while saving and also saving on income tax.
National Savings Certificate is a savings bond scheme that encourages subscribers, primarily small to mid-income investors, to invest while saving on income tax under Section 80C.
Features & Benefits of NSC
Here are some of the significant features of NSC scheme-
- Interest Rates : The certificates earn an annual fixed interest, which is revised every quarter by the government, thus guaranteeing a regular income for the investor.
- Maturity Period : The scheme originally had two types of certificates – NSC VIII Issue (5 year tenure) and NSC IX Issue (10 year tenure). With the discontinuation of the latter in December 2015, only the former issue is available for subscription.
- Tax Saver: As a government-backed tax-saving scheme, the principal invested in NSC qualifies for tax savings under Section 80C of the Income Tax Act up to Rs. 1.5 lakhs annually.
- Investment Flexibility : You can invest as small as Rs. 100 as an initial investment with no maximum limit.
- Accessible: It can be easily bought from any post office on submission of required KYC documents. Also, it is easy to transfer the certificate from one PO to another as well as from one person to another without impacting the interest accrual/maturity of the original certificate.
- Loan Collaterals: NSC certificates are accepted as collateral or security for secured loans in Banks and NBFCs. In such a case, a transfer stamp is put on the certificate and transferred to the bank while disbursing loans.
- Power of Compounding: Interest earned gets compounded annually and reinvested by default but will be payable only at maturity.
- Nomination: The investor can nominate any family member (even a minor) so that they can inherit it in the case of an unfortunate event of the investor’s demise.
- Corpus on Maturity: The investor will receive the entire corpus value on maturity. As there is no TDS on NSC payouts, the subscriber should pay the applicable tax on it while filing his Income tax returns or paying his advance tax.
- Premature Withdrawal: Generally, one cannot exit the scheme early except on the death of an investor, on a court order, or on forfeiture by a pledgee who is a Gazetted Government Officer for it.
NSC Interest Rate History
| Financial Year | April-June | July-September | October-December | January-March |
| 2023-2024 | 7.7% | 7.7% | 7.7% | 7.7% |
| 2022-2023 | 6.8% | 6.8% | 6.8% | 7.0% |
| 2021-2022 | 6.8% | 6.8% | 6.8% | 6.8% |
| 2020-2021 | 6.8% | 6.8% | 6.8% | 6.8% |
| 2019-2020 | 8.0% | 7.9% | 7.9% | 7.9% |
| 2018-2019 | 7.6% | 7.6% | 8.0% | 8.0% |
| 2017-2018 | 7.9% | 7.8% | 7.8% | 7.6% |
| 2016-2017 | 8.1% | 8.1% | 8.0% | 8.0% |
Tax Benefits of NSC Investment
While there is no upper limit on the amount that can be invested in NSC, only investments of up to Rs.1.5 lakh a year can earn a subscriber a tax deduction under Section 80C of the Income Tax Act of 1961. Furthermore, the interest earned on the certificates is also added back to the initial investment and qualify for a tax break as well.
Furthermore, for the first four years, the interest gained on NSC is assumed to be reinvested (i.e. put back to the initial investment) and so eligible for a tax credit, subject to the overall annual limit of 1.5 lakh. The interest earned in the fifth year, however, is not re-invested and is thus taxed at the investor’s applicable slab rate.
Who Should Invest in NSC?
The NSC offers guaranteed interest and complete capital protection, just like some other fixed income instruments – Public Provident Fund and Post Office FDs. However, they cannot deliver inflation-beating returns like tax saving Mutual Funds and National Pension Systems.
Basically, the Government has promoted the National Savings Certificate as a savings scheme for Indian individual citizens.
Eligibility Criteria for NSC
- Hindu Undivided Families (HUFs), Trusts, Private and public limited companies are not eligible to invest in NSC.
- The individual must be an Indian citizen. Non-resident Indians (NRIs) are not eligible to invest in NSC.
- There is no age limit for individuals in order to purchase a certificate.
Documents Required to Apply for NSC
Investors are required to submit:
- Identity proof, such as a passport, permanent account number (PAN) card, driver’s license, senior citizen ID, or any other official government identification
- Photograph.
- Address proof, like electricity bill, passport, phone bill, or bank statement
How to Invest in NSC
To invest in NSC offline, follow the listed steps:
Step 1: Collect the NSC application form online or at any post office.
Step 2: Fill out the form with all the details.
Step 3: Submit the form with self-attested copies of the required KYC documents.
Step 4: Take the original documents for verification and pay the amount you want to invest.
Step 5: Upon approval, collect the NSC of your application.
How to Apply for NSC Online
Step 1: Open Department of Posts (DOP) net banking and log in.
Step 2: Under ‘General Services’, select ‘Service Requests’.
Step 3: Click on ‘New Requests’ and choose ‘NSC Account – Open an NSC Account (For NSC)’.
Step 4: Enter the deposit amount and choose the debit account linked to the PO savings account.
Step 5: Choose ‘Click Here’ to run through the terms and conditions. Accept them once done.
Step 6: Enter the transaction password and click on ‘Submit’.
Step 7: The deposit receipt will be there to view and download.
Step 8: Login and click on ‘Accounts’ to view the details of your NSC account.
FAQs
Is NSC Interest Taxable?
NSC Interest is taxable under “Income from Other Sources”. Though, in the initial 4 years, interest is reinvested and, thus, can be claimed under Section 80C as a deduction. Note, the 5th year’s interest will be taxable as per the respective income tax slab.
How to Withdraw NSC After Maturity
Make a visit to the post office nearest to you and submit a hand-written maturity claim with the original NSC, identity slip received while purchasing, and identity proof. If the identity slip is present, the processing and payment will be done immediately.