NSC (National Savings Certificate) - Interest Rate 2024-25 & Tax Saving Benefits

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.

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.

Investment Limits - Key Information

A person can start investing in NSC with a minimum investment of Rs. 1,000 and with no maximum limit. However, the investment will be locked-in for 5 years i.e., it cannot be withdrawn before the completion of 5 years.

You can invest in NSC from the nearest post office in your name, for a minor or with another adult as a joint account. NSC comes with a fixed maturity period of five years. There is no maximum limit on the purchase of NSCs.

Who Should Invest in NSC?

Anyone looking for a safe investment avenue to earn a steady interest while saving on taxes can choose to invest in NSC. NSC offers guaranteed interest and complete capital protection. However, like most fixed income schemes, they cannot deliver inflation-beating returns like tax-saving mutual funds and the National Pension System.

The government has promoted the National Savings Certificate as a savings scheme for individuals. Hence, Hindu Undivided Families (HUFs) and trusts cannot invest in it. Furthermore, even non-resident Indians (NRI) cannot purchase NSC certificates. The scheme is open only for individual Indian residents.

Who Is Eligible To Invest In NSC?

The following are the NSC eligibility conditions that must be met in order to invest in NSCs.-

• Hindu Undivided Families (HUFs), Trusts, Private and Public Limited Companies (PLCs) are not permitted to invest in NSC.
• An Individual who is a Resident in India can invest in NSC.
• The person must be an Indian citizen. 
• Non-Resident Indians (NRIs) are not permitted to invest in NSC.
• An individual who is more than 10 years of age.

Features & Benefits of NSC

1. Fixed income: Currently, the scheme is generating a guaranteed return at the rate of 7.7% for investors. The returns offered by NSC have generally been higher than FDs.
2. Types: The scheme originally had two types of certificates – NSC VIII Issue and NSC IX Issue. The government discontinued the 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 claim up to Rs.1.5 lakh under the provisions of Section 80C of the Income Tax Act, 1961. 
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 7.7% p.a. for Q2 FY 2024-25, which the government revises every quarter. It gets compounded annually but will be payable at maturity.
6. Maturity period: The maturity period is 5 years.
7. Access: You can purchase this scheme from any post office by submitting the necessary documents and undergoing the KYC verification process. Also, it is easy to transfer the certificate from one post office branch to another. You can also open it online.
8. Loan collateral: Banks and NBFCs accept NSC as collateral or security for secured loans. To do this, the concerned postmaster should put a transfer stamp on the certificate and transfer it to the bank.
9. Power of compounding: The interest you earn on your investment gets compounded and reinvested by default, though the returns do not beat inflation.
10. Nomination: The 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. Premature withdrawal: Generally, one cannot exit the scheme early. However, they accept it in exceptional cases like the death of an investor or if there is a court order for it.

NSC Interest Rate History

NSC Interest Rates are periodically reviewed by the Ministry of Finance, leading to revisions every quarter. Interest on NSC is compounded annually and disbursed upon maturity. Below is a chart depicting the historical NSC interest rates from previous years:

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.

How to Invest in NSC?

Previously, banks or post offices issued physical NSC certificates . This has been discontinued since 2016. At the moment, certificates can be bought either by electronic mode (e-mode) or Passbook mode.

While the passbook method is unpopular and comparatively more tedious, you can effortlessly buy an NSC scheme with a savings account at an authorised bank or post office. It is important to note, however, that you would require to activate your internet banking to do the same.

How to Invest in NSC Offline

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.

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.

Comparing NSC with Other Tax-saving Investments

NSC is one of the tax-saving investment options available under Section 80C of the Income Tax Act, 1961. The other popular options are Equity Linked Savings Schemes (ELSS), National Pension System (NPS), Public Provident Fund (PPF) and Tax-Saving Fixed Deposits (FD). The table below compares NSC with other tax-saving investments:   

Now that you have some knowledge of NSC, is this scheme for you? If you are looking for capital protection and tax deductions under Section 80C, you can consider investing in NSC.

NSC Calculator - Calculate National Savings Certificate Interest Online

How to Request for a Duplicate National Savings Certificate

You can seek a duplicate if your original NSC certificate is lost, stolen, destroyed, damaged, or mutilated.

Simply complete and return the Duplicate Savings Certificates form to the post office that issued the NSC that needs to be replaced.

The following are the form's key fields:

1. Serial numbers, denominations, NSC issue, and other information regarding the certificate(s).
2. The purchase date of the certificates.
3. The objective for filing for a duplicate certificate, together with additional details, must be indicated. 

Final Word

Making investments depends on the risk appetite of the investor. One should consider all the risks and rewards associated with the investment and know enough information about the scheme. This article will provide you the relevant information about National Savings Certificate (NSC) scheme and everything one must be aware about. 

Other Schemes:  
National Pension Scheme  
Senior Citizen Savings Scheme  
Post Office Saving Scheme  
Post Office Monthly Income Scheme