National Savings Certificate (NSC)

There are plenty of options available when it comes to investments. You can choose any as per your financial goals. National Savings Certificate or NSC, a post office savings product, is a popular option. As a low-risk investment, it comes with a host of benefits. We have covered the following in this article:

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. 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 instrument like Public Provident Fund and Post Office FDs, this scheme too is a low-risk fixed-income product. You can buy it 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, but only investments of up to Rs.1.5 lakh can earn you a tax break under Section 80C of the Income Tax Act. The certificates earn a fixed interest, which is currently at a rate of 6.8% per annum. The interest rate is revised on a regular basis by the government. 

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 made NSC easily accessible for prospective investors by making it available in post office branches spread across the country. 

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 resident citizens.

Features & Benefits of NSC

1. Fixed income: Currently, the scheme is generating a guaranteed return at the rate of 6.8% 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 6.8% p.a., 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. 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.
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.

Tax benefits of NSC investment

Investments of up to Rs 1.5 lakh in the National Savings Certificate can earn the subscriber a tax rebate under Section 80C. Furthermore, the interest earned on the certificates is also added back to the initial investment and qualify for a tax break as well. 

For instance, if you purchase certificates worth Rs 1,000, you are eligible for a tax rebate on that initial investment amount in the first year. But in the second year, you can claim a tax deduction on the NSC investment(s) that year as well as the interest earned in the first year. This is because the interest is added to the original investment and compounded annually.

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-sSaving Fixed Deposits (FD). The table below compares NSC with other tax-saving investments:

Investment	Interest	Lock-in Period	Risk Profile
NSC	6.8% p.a.	5 years	Low-risk
ELSS funds	Market-linked, historical returns show 12% to 15% p.a.	3 years	Market-related risks
PPF	7.1% p.a.	15 years	Low-risk
NPS	Market-linked, historical returns show 8% to 10% p.a.	Till retirement	Market-related risks
FD	4% to 6% p.a.	5 years	Low-risk

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.

Frequently Asked Questions

What is NSC?

NSC, i.e. National Savings Certificate, is a fixed-income investment scheme backed by the government of India. The savings bond is suitable for small and medium-income investors to save tax while earning returns. This is a secure and low-risk product.

How to buy NSC online?

As of today, you cannot subscribe to NSC online. You will be required to visit the nearest Post Office to fill out the NSC application form and submit it to the executive in order to open an NSC account.

How to buy NSC?

Step 1: Visit the nearest Post Office branch and submit the duly filled NSC application form.
Step 2: Attach self-attested copies of the documents and proofs as required by the Post Office. Carry the original documents as well for verification.
Step 3: Make the payment of your investment in the form of cash, cheque, or demand draft.
Step 4: Upon processing your application, an acknowledgement of the same will be provided marking the initiation of your NSC account.

How to show NSC interest in income tax?

You can show the NSC interest earned in one of the following ways while filing ITR:

• You can show the interest earned from NSC under ‘Income from Other Sources’.
• You can claim deduction for interest earned from NSC, but you don’t show it as income. In this case, you can consider the entire interest income you have earned over the years as income in the last year.
• Don’t claim the interest earned as deduction or income. In this case, all the interest earned will be counted as ‘Income from Other Sources’ in the last year. Only the first four years’ interest will be counted as deduction.

It is important that you stick to one of the methods mentioned above throughout the NSC tenure. Experts prefer that you choose Method 1 as the interest and income will be distributed throughout the tenure and does not accumulate to the last year.

NSC comes under which section?

The money you invest into NSC gets income tax deduction under Section 80C of the Income Tax Act, 1961.

NSC or KVP? Which is better?

There are a lot of differences in the working and objectives of the two schemes—National Savings certificate (NSC) and Kisan Vikas Patra (KVP). To make this difference evident, here is a comparison table.

Parameters	NSC	KVP
Eligibility	Resident Indians only	Only Resident Indians and Trusts
Minimum Deposit Amount	Rs.100	Rs.1,000
Maximum Deposit Amount	No limit	No limit
Interest Rate (Q2 of FY 2021-22)	6.8% p.a.	6.9% p.a.
Investment Tenure	5 years	124 months (Q4 of FY 2020-21)
Premature Withdrawal	Not allowed	Only after 30 months from the date of investment
Tax Benefits	Available	Not Available
Loan Facility	Available	Available
How to Subscribe	At Post Office branches	At Post Office and participating bank branches

How to open NSC in the Post Office?

• Visit the nearest Post Office branch.
• Fill up the application form and submit it with the necessary documents.
• Make the payment towards the NSC account in cash, cheque, or DD.
• Once the processing is done, an acknowledgement for the same will be given.

How to calculate NSC interest?

You must know that the interest on NSC is compounded on a yearly basis. That is the interest you calculate on the principal amount invested in NSC should be added to the principal amount to get the principal amount for the second year.

You can calculate interest using our simple and compound interest calculator.

How to encash/redeem NSC certificates after maturity?

Upon maturity, the NSC can be encashed at any Post Office branch and not necessarily at the branch where the account is held. If you want to withdraw the money from a branch that is not your account’s home branch, you will have to submit an application with details, such as serial number, issue date, full name, registered and current address.

When you want to encash the maturity amount, you have to carry the following documents with you:

• Original NSC certificate 
• Identity proof
• NSC encashment form
• The person entitled to receive the encashment must sign behind the certificate after receiving the payment

Which is better? NSC or PPF?

Both these government-backed schemes are famous for years now. Though both these options come with minimal risk, they both have their own benefits and drawbacks. You can choose between the two based on your investment objectives.

Parameter	NSC	PPF
Account Type	Single or Joint	Single only
Tenure	5 years	15 years
Interest Rate	6.8% p.a.	7.1% p.a.
Number of Accounts	Multiple accounts can be opened with a maximum deposit of Rs.10,000 per certificate	Only one PPF account per person. Exception: You can open an account for your child and be a joint account holder for it.
Contributor	Self, joint account holder, or guardian in the case of a minor	Self or parent of the minor
Tax Benefits	Principal is tax-free up to Rs.1.5 lakh per financial year u/s 80C; the interest is taxable	Principal is tax-free up to Rs.1.5 lakh per financial year u/s 80C; the interest and maturity amount is tax-free as well
Withdrawal	Visit the Post Office branch to withdraw or encash the NSC account balance. In case you are sending a representative, provide a signed letter to authorise the representative to withdraw the money.	Visit the bank or Post Office branch to withdraw. Or, visit the NSI India website to download Form C or its equivalent to apply for withdrawal.

How long does it take for NSC to provide maturity amount double the principal amount?

NSC will take about 10.5 years to double your investment at the current interest rate of 6.8% p.a.

How to get an NSC certificate?

When you submit the application form to open the NSC account along with the KYC documents, you will have to make the payment towards the same. Once this is processed, the Post Office branch will provide you with the NSC certificate.

How to check NSC certificate online?

You have to opt for the online passbook service for NSC account by informing the Post Office branch regarding the same. The executives will give you the internet banking credentials to be used. Then, you can log into the account to view all the transaction details on your NSC account. This facility is available only at the select branches of Post Office.

Does ULIP or NSC provide tax benefits u/s 80c?

Both ULIP and NSC provide income tax deductions on the principal invested in them under Section 80C.

How to transfer NSC to another Post Office?

In order to transfer the NSC account from one Post Office branch to another, you have to submit an application at the old branch or the new branch. Further, the application must have the signatures of all the account holders in the case of Joint A or B account type.

How to fill an NSC application form?

Step 1: Fill up the application form with the relevant information, such as the Post Office branch name, your savings account number held with Post Office, and applicant’s name.
Step 2: Paste the applicants’ photograph, and select the account you would like to open, i.e. ‘NSC VIIIth issue’ from the options.
Step 3: Select the account holder type and account type from the available options.
Step 4: In the case of ‘Minor through Guardian’, fill up the details of the minor in the table 1.
Step 5: Specify the amount you would like to deposit to open the account in figures and words. IF providing cheque or DD, please write the serial number and date on it.
Step 6: Now, provide all the personal and contact details of the applicants in the table 2.
Step 7: All the applicants must add their signatures at the end of the page along with their names.
Step 8: Next, skip to the ‘Nomination’ section and enter the applicants’ names and the nominee’s name. In the table provided, provide details, such as the applicant’s relationship with the nominee, nominee’s full address, Aadhaar number, and others.
Step 9: In the case of illiterate applicants, add signatures of two witnesses for the same along with the applicants’ signatures. That’s it!

How to find the NSC certificate number?

The NSC certificate number will be provided right on the certificate. It is recommended that you note this certificate number somewhere so that you can apply for a duplicate certificate by quoting this number in case your original certificate is lost/stolen.

How to withdraw NSC before maturity?

NSC comes with a lock-in period of 5 years, i.e. it cannot be withdrawn before maturity. As exemption, NSC can be prematurely withdrawn only in the following circumstances:

• On the death of a single account, or any or all the account holders in a joint account
• On forfeiture by a pledgee being a Gazetted officer
• On order by court

Which is better? NSC and KVP?

While both NSC and KVP are offered as small savings schemes, the way the two schemes work are different. NSC provides income tax benefits, but KVP does not. The below table provides a comparison of the two schemes.

Parameter	NSC	KVP
Special Feature	Stable and guaranteed savings scheme that provides high returns	Invested amount doubles on maturity
Minimum Amount to Open the Account	Rs.1,000	Rs.1,000
Maximum Limit	None	None
Interest Rate	6.8% p.a. (Q2 of FY 2021-22); compounded annually	6.9% p.a. (Q2 of FY 2021-22); compounded annually
Tenure	5 years	124 months (Q2 of FY 2021-22)
Premature Closure	Not allowed	Allowed after 2 years and 6 months from the date of opening the account
Tax Benefits	Tax deduction can be claimed u/s 80C of the Income Tax Act	Not available

Which is better? NSC or 5-year Tax-Saving FD?

Though both NSC and 5-year FDs have a tenure of five years and offer income tax deduction u/s 80C, there are quite a few things that are different. If you are confused on which product to choose to save taxes, refer to the below table before deciding:

Parameter	NSC	FD
TDS deduction	No deduction upon maturity	TDS deducted upon maturity
Collateral facility	Can be used	Cannot be used
Interest Compounding Frequency	Once a year	Once every quarter
Interest Rate	6.8% p.a. (Q2 of FY 2021-22)	5%-7.25% p.a. (varies from bank to bank)

What is the minimum amount for NSC?

The minimum amount required to open a NSC account is Rs.1,000. If you want to deposit a higher amount, you can do so in the multiples of Rs.100. There is no maximum limit for the amount you deposit.

How to know my NSC ID?

Request your bank or Post Office to provide the login credentials such that you can access your NSC account details online.

How to link NSC with Aadhaar?

You can link Aadhaar to any Post Office Saving Schemes either online or offline. Here is how you can do it online:

1. Log on to your internet banking account using your User ID and password to access your NSC account.
2. Click on the ‘Registration of Aadhaar Number in Internet Banking’ option on the home page.
3. Enter your 12-digit Aadhaar number and click on ‘Confirm’.
4. Select the account you would like to link Aadhaar and done.

What is the NSC VIII issue?

Earlier, NSC came in two variants—NSC VIII and NSC XI. The former came with a tenure of 5 years and the latter with that of 10 years. However, the latter variant is discontinued. Therefore, it is only NSC VIII issue with a 5-year tenure that is available for subscription currently.

How to pledge NSC?

Step 1: Fill in your details on Form NC41, get the signatures of the pledger and pledgee, and submit it to the Post Office branch.
Step 2: Attach the original certificate with the application form while submitting it to the Post Office branch.
Step 3: You can pledge the NSC certificate only to:

• The President of India/Governor of the State.
• RBI/Scheduled Bank/Co-operative Society/Co-operative Bank.
• Corporation (public/private)/Govt. Company/Local Authority.
• Housing finance company.

Step 4: The PostMaster will endorse ‘Transferred Security to’ written on the certificate in red with date and signature upon processing your application. Fees may be charged for the same.

NSC is for how many years?

NSC VIII issue that is currently available for subscription comes with a tenure of five years.

How to verify an NSC certificate?

Step 1: Apply for internet banking at your Post Office or bank. Once it is approved, you can access your NSC account online.
Step 2: There will not be any serial numbers anymore. Instead, an account number will be issued.
Since everything has been upgraded to online banking since 2016, there are less possibilities of you getting scammed over NSC investment.

NSC vs LIC? Which is better?

Parameter	NSC	LIC
Objective	Small savings with returns	Life cover with sum assured
Payment Frequency	One-time lump sum payment	Premiums can be paid in monthly, quarterly, yearly intervals
Tax Benefits	Capital invested gets income tax deduction u/s 80C	Capital, interest earned, and maturity amount are exempt from tax
Sub-categories	None as of now	Many different life insurance schemes are available