National Savings Certificate (NSC)-Safe, Efficient and Reliable-Series 1-Part 4

National Saving Certificate is a fixed income investment scheme which can be opened at any Post Office across India. It is Government of India scheme which encourages subscribers especially small to mid income category to invest and also save on income tax. NSC can be also related to instrument Saving Bond.

Who can open a NSC account?

1. The scheme is open only for individual Indian citizens.
2. NRI’s, Hindu Undivided Families (HUF) and trusts cannot open a NSC account.
3. NSC can be purchased from the nearest post office in subscriber name, for a minor or with another adult as a joint account. 

Features of NSC Account

1. Fixed income: Presently, you get guaranteed returns (6.8% annual interest) and can enjoy a regular income.
2. Types: The scheme originally had two types of certificates – NSC VIII Issue and NSC IX Issue. The government discontinued NSC IX Issue in December 2015. So, only the NSC VIII Issue is open for subscription currently.
3. Tax saver: As a government-backed tax-saving scheme, you can invest for up to Rs.1.5 lakh to claim the benefits of 80C deductions.
4. Start small: You can invest as low as Rs.1,000 (or multiples of Rs.100) as an initial investment, and increase the amount when feasible.
5. Interest rate: Currently, the rate of interest is 6.80 %, which the government revises every quarter. It gets compounded annually but will be payable at maturity.
6. Maturity period: The maturity period is five years.
7. Purchase : You can purchase this scheme from any post office by submitting the necessary documents and doing the KYC process. It is easy to transfer the certificate from one PO to another too.
8. Loan collateral: Banks and NBFCs accept NSC as a collateral or security for secured loans. To do this, the concerned postmaster should put a transfer stamp to the certificate and transfer it to the bank.
9. Power of compounding: Interest you earn on your investment gets compounded and reinvested by default, though the returns do not beat inflation.
10. Nomination: Investor can nominate a family member (even a minor) so that they can inherit it in the unfortunate event of the investor’s demise.
11. Corpus after maturity: Upon maturity, you will receive the entire maturity value. Since there is no TDS on NSC payouts, the subscriber should pay the applicable tax on it.
12. Transfer : In case of NSC VIII , transfer of certificates from one person to another can be done only once from date of issue to date of maturity.
13. Premature withdrawal: Generally, one cannot exit the scheme early. However, they accept it in exceptional cases like the death of investor or if there is a court order for it.

TAX BENEFITS UNDER NSC

The five year NSC or NSC currently fetches interest of 6.80 %.(Revised by Government of India on regular basis). There is no upper limit for investment in the NSC and the minimum investment required is Rs 100. Deposits of up to Rs 1.50 lakh in the NSC in a financial year qualifies for tax deduction under Section 80C.

Interest accrued yearly on NSCs is deemed to be reinvested on behalf of the investor and qualifies for deduction under Section 80C within the total limit of Rs 1.50 lakh. But as the final year’s or the fifth year’s interest is not reinvested, it cannot be claimed as a deduction from taxable income under Section 80C. Therefore, the last year’s interest income is added to the certificate-holder’s income and taxed accordingly.

Comparision of NSC and other TAX Saving instruments

Investment	Interest	Lock-in Period	Risk Profile
NSC	6.80 %	5 years	Low-risk
ELSS funds	12 % to 15 %	3 years	Market linked risks
PPF	7.10 %	15 years	Low-risk
NPS	8 % to 12 %	Till retirement	Market linked risks
FD (Tax Saver)	5 % to 6 %	5 years	Low-risk

If you are planning for a fixed income and tax efficient instrument, then invest in NSC.

NSC interest calculator

A National Savings Certificate holder can calculate how much interest he/she would receive by investing in NSC by using an NSC Calculator. You can visit https://www.incometaxindia.gov.in/Pages/tools/interest-on-national-savings-certificate.aspx to calculate the amount of interest that will be earned.

Once the details are entered, the calculator will reveal the total interest amount accrued so far. The interest paid on a National Savings Certificate is compounded annually and is paid at the time of maturity. The annual interest earned on NSC can be reinvested and qualifies tax exemption under section 80C of the Indian Income Tax Act, 1961.

NSC Calculator

Sl No	Amount Invested (Rs.)	Rate of Interest	Maturity Amount (after 5 years)(In Rs.)
1	10000	6.80%	13895
2	50000	6.80%	69475
3	100000	6.80%	138949
4	150000	6.80%	208424
5	200000	6.80%	277899

Subscriber has to calculate the tax liability every year on the interest amount received.

For safe and sound returns, invest in NSC!!!!!!!!!!

If any query related to NSC, please comment below. I will be happy to help…..