National Savings Certificate, NSC in short, is a secured investment scheme offered by the Government of India. Primarily a savings bond, NSC is provided to individuals through different post offices. There is no maximum cap on the investment amount or the number of certificates an individual can buy, thus allowing them to invest as much as they want in NSC. A significant advantage of this scheme is that NSC interest rates are fixed and not subjected to market risks.
The scheme mainly aims to provide easy savings options to average and low-income earners. Being offered through post offices has made this scheme readily available to the Indian masses, resulting in its increased popularity. It is important to note that Non-Resident Indians, Person of Indian Origin, and Overseas Citizens of India cannot invest or save in NSC. Furthermore, Hindu Undivided Families cannot invest in NSCs either.
NSC Interest Rates
NSC interest rates vary depending on their NSC’s maturity. These schemes introduced by the Government of India are available with two tenors variants for maturity. The rate of interest provided as per the maturity periods are listed below along with their tenure and issue numbers:
|Name||Tenure||Rate of Interest||Compounding Frequency|
|NSC 8 Issue||5 years||8.50%||Half-yearly|
|NSC9 Issue||10 years||8.80%||Half-yearly|
Interest Applicability on Premature Withdrawal of NSC
The different interest applicabilities are mentioned in the table below.
|Time of Withdrawal||Interest Applicability|
|Withdrawal before the completion of 1 year||No interest|
|Withdrawal after the completion of 1 year||Interest offered at the rate applicable then.|
Further, the specific scenarios under which investments in NSC can be withdrawn are listed below. During premature withdrawal, the return is calculated as per the National Saving Certificate interest rate though the tenor duration is shorter.
- The demise of the owner.
- If the certificate is forfeited.
- In case a court of law orders the withdrawal of the invested amount.
Every applicant needs to note that while NSC interest rate remains unchanged, the premature withdrawal of NSC requires specific documents which are mentioned below.
- Original NSC documents.
- Filled in NSC encashment form.
- Identity proof similar to application requirements.
- For minors, attestation of the guardian must also be presented.
- For nominees applying for withdrawal, Annexure 1 and 2 forms must also be submitted.
Usually, the post office releases the corpus via cheque.
Benefits of NSC Rates
While NSC interest rate 2020 is quite lucrative, it is also essential for potential investors to note all features and benefits offered under this scheme. These are discussed below in detail.
- Fixed return: Return on any investment in NSC is fixed since the rates of interest offered on them are not subject to market fluctuations. However, it is essential to note that the government has the right to revise this rate every 6 months.
- Tenure choice: The two different issues by the Government of India offer two different rates of interest to choose from. Investors can opt to go for a tenure of 5 or 10 years, with NSC rate being decided by their choice of tenure.
- Choice of investment amount: The minimum investment amount for NSC stands at Rs.100. This makes it a popular choice of investment for low-income earners. Furthermore, individuals can choose to invest in multiples of Rs.100. There is no upper limit to investment in NSC, thereby allowing individuals to invest as per their income, savings and long-term financial goals.
- Tax benefits: Quite a few tax benefits are offered on investments made in NSC. This includes both on the principal invested as well as the interest earned as per the NSC rates. Investments in NSC qualify for different deductions under section 80C of the Income Tax Act and other sections, which are discussed later.
- Easy access: Investment via post offices across India has made NSC readily available to the Indian population and ultimately led to its popularity.
- Loan options: While high NSC interest rate makes it an attractive investment option, a significant feature which makes it even more lucrative is the availability of loans against these investments. NSC certificates can be provided as collaterals at different financial institutions to avail secured loans. One can thus, conveniently fulfil various financial requirements by availing such loans. Also, as secured loans carry a lower risk for lenders, interest rates offered on them are convenient, which makes repayment affordable too.
- Easy nomination: Along with attractive NSC interest rates, the investment plan also allows an investor to nominate another to receive benefits in case of his/her demise. The nominee can thus receive the entire corpus after scheme maturity.
- Easy transfer: This policy can be easily transferred from one post office to another in case an investor is relocating. It does not impact the interest since returns are generated at the NSC current interest rate decided by the Government of India. Additionally, this scheme also allows investors to transfer ownership, although this facility can be availed only once.
Tax Benefits on NSC Rates
While NSC interest rates offer a substantial return on investment, investors must be aware of the tax benefits provided for the plan to maximise their accompanying benefits. Under Section 80C of Income Tax Act 1961, investments in NSC are eligible for deduction from the taxable income up to a sum of Rs. 1.5 Lakh. Additionally, the interest earned every year is added back to the principal amount and deemed invested until maturity, thus becoming eligible for tax deductions u/s 80C. However, on maturity, the interest is paid back to the investor, and therefore taxable.
Let us consider an individual invest a sum of Rs. 10,000 for a tenor of 5 years. With the relevant NSC interest rate being 8.5%, the interest accrued at the end of the first year is Rs. 850. In the second year, the interest is compounded, thereby making the investment sum for the second year to be Rs.10,850. The interest earned in the final year of maturity is only subject to tax applicability. However, it is taxable only if added with other earnings of the individual and crosses the minimum tax slab.
Eligibility Criteria and Document Requirements for NSC
While eligibility criteria for NSC simply require an investor to be resident Indian without any age limit, the necessary documents to save in NSC must be noted. Also, the scheme does not outline age requirement as eligibility, thus allowing individuals from all age groups to benefit from the plan. Along with checking the NSC interest rate chart, investors should also check the documents listed below since their submission is vital to buy a National Savings Certificate.
- Fully filled-in NSC application form.
- Any Government-issued identification proof like a voter ID card, Aadhaar card, passport, driving license, etc.
- Address proof of the applicant like electricity bill, landline bill, etc.
- Passport-sized photograph of the applicant.
Application Procedure for NSC
The application procedure for NSC is quite simple. Interested applicants can simply apply for the certificate at their nearest post office along with the documents mentioned above. They can make the payment either by cash or cheque.
Who should consider investing in NSC?
This investment scheme, with its stable return on NSC interest rates, is best for low and average income earners. Individuals who do not prefer their investments to be subjected to market fluctuations and yet generate substantial returns should opt for this scheme. With a low investment amount for savings, any disposable amount over Rs. 100 that an earner has can be invested in these certificates.
The NSC interest rates offered by the Government of India are attractive and is one of the best options for individuals who do not intend to bear any risk their expected returns. However, investment in NSCs also comes with the limitation that while the returns are quite high, they might not be high enough to beat the current inflation rate.
- Can an individual invest in NSC along with another investor?
Yes, there are 3 types of NSC, depending on the number of owners of these certificates. While single-holder certificates have individual owners, Joint type A and B are issued to 2 individuals. In the case of A, interest is paid to both, while in the case of Joint investment type B, it is paid to one individual.
- How can one pay for the purchase of NSC?
You can purchase an NSC via payment made either through cash or cheque.
- Can I immediately transfer my certificate to another person?
It officially takes 1 year to complete the transfer of the National Savings Certificate.
- Can I buy NSC from anywhere other than the post office?
No. NSC can only be bought from the post office.