The National Savings Certificate (NSC) is a fixed Income Investment scheme that you can open with any post office branch. The scheme is a Government of India initiative. It is a savings bond that encourages subscribers mainly small to mid-income investors — to invest while saving on income tax.
A fixed income scheme that can be opened at a post office is the National Savings Certificate. The scheme is a low-risk product and is secure.
| Tenure | 5 years |
| Rate of Interest | 6.8% p.a. |
| Minimum Amount | Rs. 1,000 |
| Tax Benefits | Under Section 80C of the Income Tax Act. |
NSC Eligibility
The eligibility criteria for investors to purchase the NSC are mentioned below;
- The individual must be an Indian citizen.
- There is no age limit for individuals in order to purchase a certificate.
- Non-resident Indians cannot invest in NSC.
- Investments can be made with another adult or individuals can buy an NSC on behalf of a minor.
- Under NSC VIII Issue, HUFs and Trusts are not eligible to invest in the scheme.
NSC Features
The main features of the scheme are mentioned below:
Minimum investments:
The minimum amount that a certificate can he purchased for is Rs.100. The different denominations that the certificate can be purchased for are Rs.10,000, Rs.5,000, Rs.1,000, Rs.500, and Rs.100. Initially, small investments can be made, and individuals can increase investments when feasible.
Maturity tenure:
5 years and 10 years are the two maturity periods of the scheme that individuals can choose from.
Rate of interest:
Currently, the rate of interest has been reduced from 7.9% to 6.8%. and it is compounded on an annual basis. However, the interest is payable only at maturity. For example, investment of Rs.100 will get the subscriber Rs.146.93 after 5 years of investment.
Nominations:
Family members including minors can be added as nominees by the investor. In case the investor passes away during the tenure of the scheme. the nominee will be able to inherit the scheme.
Different types of NSC:
Initially, the NSC IX issue and the NSC VIII Issue were the two types of certificates available. However, as of December 2015, the Government of India stopped the NSC IX Issue. Therefore, only the NSC VIII issue is available.
Loans against NSC:
The NSC can be used as a security or collateral and can be provided to banks to avail loans. However, the respective post master must authorise the transfer of the certificate to the bank.
Purchase of NSC:
Upon submitting the required documents, the scheme can be purchased at post offices.
Transfer of certificate:
Transfer of NSC is possible from one post office to another. Transfer of certificate from one individual to another is also possible. However, the certificate will remain the same and the name of the new owner shall be written on the certificate and the name of the old owner will be rounded.
Tax benefits provided by the NSC
Given below are the NSC tax benefits that individuals can avail by investing in the NSC:
- Under Section 80C of the Income-tax Act, 1961, tax benefits of up to Rs. 1.5 lakh can be availed by investing towards the NSC.
- The interest that is generated on a yearly basis by investing in the NSC is considered as a new investment for tax benefits.
- Tax Deducted at Source (TDS) is not applicable under The National Savings Certificate. However, as per the marginal income tax rates, the tax must be paid for the interest that is earned.
Interest Rate on National Savings Certificate (NSC)
The National Savings Certificate interest rate is subject to periodic change as per the decisions communicated by the Finance Ministry. The applicable NSC interest rate for Q4 FY 2021-22 (January to March) is 6.8%. The NSC rate in the previous quarter (October to December 2021) was also 6.8%. Interest is compounded annually. The following are the historic rates of interest for the scheme*
| Period | Interest Rate |
| Q3 FY 2021-22 | 6.8% |
| Q2FY2021-22 | 6.8% |
| Q1 FY 2021-22 | 6.8% |
| Q4 FY 2020-21 | 6.8% |
| Q4 FY 2019-20 | 7.9% |
| Q1 FY 2018-19 | 7.6% |
| Q2 FY 2018-19 | 7.6% |
| Q3 FY 2018-19 | 8.0% |
| Q4 FY 2018-19 | 8.0% |
| Q1 FY 2018-19 | 8.0% |
| Q2 FY 2019-20 | 7.9% |
| Q3 FY 2019-20 | 7.9% |
* interest earned from NSC is compounded annually but payable only at maturity.
Key benefits of investing in NSCs
Backed by the Government of India, the National Savings Certificates serve as the safest means of investment and come with a lot of attractive benefits. Listed below are the benefits offered by NSC:
Attractive interest Rates:
NSCs offer attractive rates of interest on your savings. YOU can receive interest up to 8.5%.
Assured returns:
Investors can receive assured returns by investing in NSC for 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 NSCs.
Loan against NSCs:
Banks allow loans against NSC certificates. Individuals can use National Savings Certificates as collateral to get loans.
NSC Denominations:
National Savings Certificates are issued in different denominations such as Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.10,000. A person is free to purchase any number of NSC as per his/her convenience.
NSC Certificate Transfer:
The NSC can be transferred from one individual to another, if the certificate holder intends to transfer.
Maturity Period and Premature Withdrawal under the NSC
Under most scenarios, the amount that has been invested towards the NSC cannot be withdrawn before the maturity period of 5 years. However, under certain cases, premature withdrawal is allowed. Given below arc the cases where premature withdrawal is allowed under the NSC scheme:
- In case the certificate holder passes away.
- On the forfeiture of the certificate. However, the pledgee must be a Gazette Government Officer.
- If ordered by the court of law that the invested amount can be withdrawn.
However, certain documents must be submitted by the certificate holder for the withdrawal of the funds. Given below are the list of documents that must he submitted:
- The original National Savings Certificate must be submitted.
- The NSC encashment form will need to be submitted.
- Proof of identity.
- The attestation of the guardian is compulsory in ca.se the NSC was purchased on behalf of a minor.
- In case the certificate holder passes away, the nominee can encash the invested amount by submitting
the Annexure 1 (registered at a post office) and the Annexure 2 (legal evidence) forms.
In case the amount is withdrawn within a year, no interest will be paid. A penalty will be charged in case of early withdrawals as well. The maturity amount is paid by the post office by cheque.
