Updated on: Apr 16th, 2024
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132 min read
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 also saving on income tax.
NSC – Key Information | |
Interest Rate | 7.7% per annum |
Minimum Investment | Rs.1,000 |
Lock-in Period | 5 years |
Risk Profile | Low-risk |
Tax Benefit | Up to Rs.1.5 lakh under Section 80C |
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.
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.
The following are the NSC eligibility conditions that must be met in order to invest in NSCs.-
1. Hindu Undivided Families (HUFs), Trusts, Private and Public Limited Companies (PLCs) are not permitted to invest in NSC.
2. The person must be an Indian citizen. Non-Resident Indians (NRIs) are not permitted to invest in NSC.
3. An individual who is more than 10 years of age.
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.
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.
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.
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.
Investors are required to submit:
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:
Investment | Interest | Lock-in Period | Risk Profile |
NSC | 7.7% 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 | 7% to 8% 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.
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:
National Savings Certificate (NSC) is a government-backed fixed-income investment scheme available through post offices. It offers a 7.7% annual interest rate, tax benefits under Section 80C, and a low-risk profile. Only Indian residents can invest, and the scheme has a lock-in period of 5 years. Investors can benefit from compounding interest, loan collateral, and nomination facilities.