Are you contemplating the National Savings Certificate (NSC) as an investment option? This article aims to provide you with comprehensive insights and analysis to help you determine whether NSC is a suitable investment choice for you. By examining its features, returns, risks, and tax implications, you will gain a clear understanding of NSC’s viability, empowering you to make an informed decision about your investment portfolio.
What is National Savings Certificate?
National Savings Certificate (NSC) is a tax-saving investment designed to promote small and medium savings, backed by the Central Government.
The NSC scheme is widely accessible through Post Offices and is actively promoted by the Indian Government. Due to its government backing, the National Savings Certificate (NSC) is widely regarded as a highly secure investment option with minimal risk.
Only Indian citizens are eligible to invest in NSCs, while Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) cannot invest in it. Because of its income tax benefits, low minimum investment requirements, and minimal risk, the NSC is experiencing a surge in popularity.
Key Features of NSC:
- NSCs can be conveniently purchased from any post office by submitting the required documents and completing the KYC verification process. Transferring the certificate from one post office branch to another is a straightforward process.
- The maturity period for National Savings Certificate is five years.
- Currently, the scheme offers a guaranteed interest rate of 7.7% per annum for Q3 FY 2023-24. Historically, the returns provided by NSC have been higher compared to fixed deposits (FDs).
- Initially, the NSC scheme used to offer two types of certificates: NSC VIII Issue and NSC IX Issue. However, the government discontinued the NSC IX Issue in December 2015, leaving only the NSC VIII Issue available for subscription.
- Investors can claim deductions of up to ₹1,50,000 under Section 80C of the Income Tax Act, 1961.
- The minimum investment amount required for National Savings Certificate is ₹1,000 (in multiples of ₹100 thereafter), with no maximum limit.
- The interest earned on the investment is compounded annually and reinvested by default, but it becomes payable upon maturity.
- Investors have the option to nominate a family member, even a minor, to inherit the NSC in case of the investor’s unfortunate demise.
- Upon maturity, the investor receives the entire maturity value. Since NSC payouts do not attract TDS (Tax Deducted at Source), the subscriber is responsible for paying the applicable tax on the returns.
- Typically, early exit from the scheme is not permitted. However, there are exceptional cases where exits are allowed, such as the demise of the investor or under a court order.
Benefits of National Savings Certificate:
Investing in NSCs offers several significant advantages:
- NSC investments are considered almost risk-free since they are backed by the Government of India, providing investors with high security.
- NSC investments provide flexibility to investors as they have a low minimum investment requirement of ₹1,000 and no maximum limit, allowing individuals to invest according to their financial capacity and goals.
- National Savings Certificates are easily accessible as they are available at all Indian Post Offices, ensuring convenient and widespread availability for investors.
- These certificates can be purchased in the name of a minor, enabling individuals to invest on behalf of their children or other young family members, promoting long-term savings habits.
- In the unfortunate event of the investor’s demise, National Savings Certificates can be transferred to a nominated family member, ensuring continuity and allowing the chosen beneficiary to reap the benefits of the investment.
- Banks and Non-Banking Financial Companies (NBFCs) accept NSCs as collateral or security for secured loans, enabling investors to leverage their investment for potential borrowing needs, providing an additional avenue for financial flexibility.
Tax Benefits of NSC:
- While there is no maximum limit on NSC purchases, tax savings under Section 80C of the Income Tax Act, 1961, are only applicable for investments up to ₹1,50,000 annually.
- Furthermore, the annual interest earned on NSC during the first four years is considered to be reinvested, meaning it is added back to the initial investment. This reinvested interest is also eligible for a tax break, subject to the overall annual limit of ₹1,50,000/-. However, the interest earned in the fifth year is not reinvested and is taxable based on the investor’s applicable slab rate.
- Tax Deducted at Source (TDS) does not apply to National Savings Certificates. However, as per the applicable income tax slabs, the investor is required to pay taxes on the interest earned.
National Savings Certificate Interest Rates:
The Ministry of Finance regularly announces the interest rates for National Savings Certificates on a quarterly basis. Here are the historical interest rates of the NSC scheme:
| Date Range | Interest Rate (% per annum) |
| 01-Apr-2023 to 30-Sep-2024 | 7.70 |
| 01-Jan-2023 to 31-Mar-2023 | 7.00 |
| 01-Apr-2020 to 31-Dec-2022 | 6.80 |
| 01-Jul-2019 to 31-Mar-2020 | 7.90 |
| 01-Oct-2018 to 30-Jun-2019 | 8.00 |
| 01-Jan-2018 to 30-Sep-2018 | 7.60 |
| 01-Jul-2017 to 31-Dec-2017 | 7.80 |
| 01-Apr-2017 to 30-Jun-2017 | 7.90 |
| 01-Oct-2016 to 31-Mar-2017 | 8.00 |
| 01-Apr-2016 to 30-Sep-2016 | 8.10 |
| 01-Apr-2013 to 31-Mar-2016 | 8.50 |
| 01-Apr-2012 to 31-Mar-2013 | 8.60 |
| 01-Dec-2011 to 31-Mar-2012 | 8.40 |
| 01-Mar-2003 to 30-Nov-2011 | 8.00 |
| 01-Mar-2002 to 28-Feb-2003 | 9.00 |
| 15-Jan-2000 to 28-Feb-2002 | 9.50 |
| 01-Jan-1999 to 14-Jan-2000 | 11.50 |
| 08-May-1989 to 31-Dec-1998 | 12.00 |
Before 2016, the NSC interest rates were announced annually or as required. However, starting from April 2016, the interest rates have been announced every quarter.
How to get NSC maturity amount?
Upon completion of five years from the date of deposit, the NSC matures, and you can redeem it at any Post Office branch, not necessarily the branch where the account is held. If you wish to withdraw the funds from a branch other than your account’s home branch, you need to submit an application with specific details, including the serial number, issue date, full name, registered address, and current address.
During the calculation of the maturity value, any fractional amount of a rupee will be rounded off to the nearest rupee. In this rounding process, amounts equal to or exceeding fifty paise will be rounded up to the nearest rupee, while amounts below fifty paise will be disregarded.
When you decide to encash the maturity amount, ensure that you carry the following documents:
- Original National Savings Certificate
- Identity proof
- NSC encashment form
The person eligible to receive the encashment must sign on the back of the certificate upon receiving the payment.
Premature Closure of NSC Account:
The NSC account cannot be closed before maturity except in the following circumstances:
- In the event of the account holder’s death in a single account or any or all of the account holders in a joint account.
- Forfeiture by a pledgee who is a Gazetted Officer, provided that the pledge adheres to the guidelines of this Scheme.
- When ordered by a court.
If an account is closed prematurely within one year from the date of deposit, only the principal amount will be payable.
In the case of premature closure after one year but before three years from the date of deposit, the closure will be permitted, and the interest on the principal amount will be payable at the rate applicable to the Post Office Savings Account for the completed months the account has been held.
For accounts prematurely closed after three years from the date of opening, the payable amount, inclusive of accrued interest, will be disbursed.
NSC Eligibility:
- Any resident Indian can purchase National Savings Certificates.
- Adults can invest individually or jointly (up to 3 adults).*
- A guardian can open an account on behalf of a minor or a person of unsound mind.
- Minors above ten years old can open NSC accounts in their own name.
There is no specific age limit imposed on individuals to purchase NSC certificates.
Joint Tenancy With a Right Of Survivorship:
Before July 2023, National Savings Certificates (NSCs) offered two types of joint certificates: Joint Type A and Joint Type B. In Joint Type A, ownership was jointly shared, and upon the passing of an account holder, the remaining account holders or the sole survivor retained ownership. In contrast, in Joint Type B, any account holder or survivor could access the funds.
In July 2023, the Post Office simplified joint account rules by introducing a single type: Joint Tenancy With a Right Of Survivorship (JTWROS). This new approach ensures equal ownership among account holders, and in the event of an account holder’s death, the remaining account holders automatically become the sole owners. This streamlined process eliminates potential disputes and simplifies ownership transfer.
How to invest in National Savings Certificate?
Investing in National Savings Certificates can be done either online or offline.
How to invest in NSC online?
To open an NSC account online, follow these steps:
- Log in to DOP internet banking.
- Go to the “General Services” section and click on “Service Requests,” and then select “New Requests.”
- Choose “NSC Account – Open an NSC Account (For NSC).”
- Enter the desired minimum deposit amount for NSC and select the debit account linked to your Post Office savings account.
- Click on “Click Here” to read and accept the terms and conditions, and then submit the online application.
- Enter the transaction password, click on “Submit,” and view or download the deposit receipt.
- To view the details of the opened NSC account, log in again and navigate to the “Accounts” section. The nominee specified in the linked Post Office savings account will be used to open the NSC in the name of the DOP online banking user.
How to invest in NSC offline?
To invest in NSC offline, you can follow these steps at any Indian Post Office by submitting the required KYC documents:
- Fill out the NSC application Form, which is available both online and at all Indian post offices.
- Submit self-attested copies of the necessary KYC documents. It is essential to carry the original documents for verification purposes.
- Make the payment for the desired investment amount using cash or a cheque.
- After the purchase of certificates is processed, NSCs corresponding to the invested amounts will be printed and made available for collection at the post office.
Documents Required to Apply for NSC:
When applying for an National Savings Certificate, the following documents need to be submitted:
- NSC application form: The form should be duly filled and signed by the investor.
- Identification proof: An original identification proof such as a Passport, Permanent Account Number (PAN) Card, Voter ID, Driving license, Senior Citizen ID, or Government ID should be provided for verification purposes.
- Recent photograph: One recent passport-sized photograph of the investor needs to be submitted along with the application.
- Address proof: Proof of address is required, which can be an Electricity Bill, Passport, Telephone Bill, Bank Statement along with a Cheque, or any other official document that verifies the investor’s address.
How to transfer NSC to another person?
National Savings Certificate can be transferred from one individual to another, provided that the transferee meets the eligibility criteria to open an account under this Scheme. The account can be transferred in the following scenarios:
- In the event of the account holder’s demise in a single account or the demise of all account holders in a joint account, the account will be transferred to the appropriate legal heirs or nominees.
- Upon the court’s order, the account can be transferred from the account holder to the court or to another individual, as directed by the court.
- When an account is pledged, it will be transferred to the pledgee.
- If any of the account holders in a joint account passes away, the account will be transferred to the name of the surviving account holders.
Pledging of National Savings Certificate:
- National Savings Certificates can be pledged or transferred as security upon the depositor’s application, supported by an acceptance letter from the pledgee.
- The transfer of an NSC account can be made to:
- The President of India or the Governor of a State in their official capacity.
- The Reserve Bank of India, a Scheduled Bank, or a Cooperative Society, including a Cooperative Bank.
- A Public or Private Corporation, a Government company, or a Local Authority.
- A Housing Finance Company approved by the National Housing Bank and notified by the Central Government.
However, an account opened on behalf of a minor or a person of unsound mind will not be permitted to transfer unless the guardian certifies in writing that the minor or person of unsound mind is alive and the transfer is for his/her benefit.
- When an account is transferred as security, the authorized officer will make the following endorsement in the account’s record, including the Savings Certificate: “Transferred as security to…”
- Except as otherwise provided in this scheme, the transferee of an account will be deemed the depositor until it is transferred back.
- Upon written authority from the transferee and with the prior written sanction of the authorized officer, an account that has been transferred may be transferred back. When such a re-transfer occurs, the authorized officer of the accounts office will make the following endorsement in the account’s record, including the Certificate: “Transferred back to…”
- A blind or physically impaired individual who is unable to operate the account may pledge their deposit through any literate individual authorized for this purpose.
Payment upon the demise of the NSC account holder:
In the unfortunate event of the account holder’s death in a single account or the demise of all account holders in a joint account, the eligible balance in the account will be disbursed according to the following guidelines:
- If a nomination is in force at the time of the account holder’s death in a single account or the death of all account holders in a joint account, the nominee may apply for the payment of the eligible balance. The application must include proof of the account holder’s death and, if any other nominee has also passed away, proof of their demise as well.
- If there are two or more surviving nominees, the eligible balance will be distributed in the proportions specified by the account holder during the nomination process. In the absence of any specific proportions or shares, the balance will be divided equally among all surviving nominees.
- In the event of the death of any nominee, their designated share of the eligible balance will be distributed among the surviving nominees in the same proportions as their specified shares.
- If the surviving nominee is a minor, the payment will be made to a person appointed by the account holder to receive such payment. If no such person has been appointed, the payment will be made to the guardian of the minor.
- In the event of a depositor’s demise without an active nomination, and in the absence of probate of his will, letters of administration of his estate, or a succession certificate as per the Indian Succession Act, 1925 (39 of 1925), if such documentation is not provided to the authorized officer of the relevant accounts office where the account is held within six months from the death of the depositor, then:
(i) If the amount in the account is less than ₹5,00,000/-, then the authorized officer of the accounts office or the designated authority of the institution to which the accounts office belongs can pay it to the person who appears to be the rightful claimant, as determined by the officer’s satisfaction. This payment can be made upon submission of an application accompanied by the following documents:
(a) Death certificate
(b) Original passbook or deposit receipt/statement of account
(c) Affidavit
(d) Letter of disclaimer
(e) Bond of indemnity
(ii) If the total amount held in the account of the deceased exceeds ₹5,00,000/-, then the accounts office shall release the amount to the claimant upon submission of a ‘Succession Certificate’ issued by the court, along with the following documents:
(a) Claim form
(b) Original passbook, deposit receipt, or statement of account
(c) Death certificate of the account holder.
- If there are three or fewer surviving nominees or legal heirs, they have the choice to either keep the account active and receive the deposited amount along with interest upon maturity according to the rules of this Scheme, as if they were the original account holders, or close the account and receive the deposited amount along with interest.
- In the event of the death of one or two account holders in a joint account, the surviving account holder(s), if any, will be considered the owner(s) of the account. They have the option to either continue the account or close it.
Who should consider investing in NSC?
You can consider investing in National Savings Certificate if:
- You want a fixed interest rate.
- You have low risk appetite.
- You want to save tax.
Loan Against NSC:
If you are considering obtaining a loan using your National Savings Certificates as collateral, please take note of the following important terms and conditions:
- Only resident Indians are eligible to apply for a loan against NSC.
- Currently, only a few prominent private and public-sector banks provide this service.
- The margin for a loan against NSC depends on the remaining time until maturity.
- The interest rate offered on the loan is determined by the specific lending institution.
- The loan duration will correspond to the period remaining until the NSC matures.
The aforementioned points highlight the general features of a loan against National Savings Certificate. However, it’s important to note that specific details such as the margin, interest rate, and tenure may vary from one lender to another.
Comparing NSC with other tax-saving Investments:
Kindly refer to the images below to assess and compare NSC with other Post Office Schemes.
*The interest rates for the respective scheme are subject to periodic revisions. Prior to investing, please verify the prevailing interest rate.
Aadhaar and PAN are now mandatory for NSC Account:
According to a recent notification from the Ministry of Finance, providing your Aadhaar number and PAN is mandatory when opening a new NSC account. If you have not been assigned an Aadhaar number yet, you must provide proof of application or enrolment ID for Aadhaar when opening the account. You will then need to provide the Aadhaar number to the accounts office within six months from the date of account opening.
Resources:
https://scripbox.com/plan/nsc-calculator/
https://www.indiapost.gov.in/VAS/DOP_PDFFiles/form/AccountopeningCertificate.pdf
Frequently Asked Questions:
What is NSC?
NSC or National Savings Certificate, is an investment scheme that offers fixed-income returns and is backed by the Government of India. It is designed to serve the needs of small and medium-income investors who wish to save tax while earning risk-free returns.
Can HUF invest in NSC?
No. HUFs cannot purchase National Savings Certificate.
Can NRI invest in NSC?
No. NRIs cannot purchase National Savings Certificate.
How to claim NSC maturity amount?
If the post office branch is operating under CBS (Core Banking Solution) connectivity, investors can easily encash their NSC after maturity. To claim the maturity amount, investors need to submit the original National Savings Certificate along with their identity proof. The officials will then verify the investor’s credentials from the issuing branch through the CBS channel.
What are the options for receiving the NSC maturity amount?
Upon maturity, you can either choose to encash your National Savings Certificate in hard cash or have it credited to your savings bank account. You can receive it in cash if the maturity amount is up to ₹20,000/-.
What happens if NSC is not redeemed upon maturity?
If an individual does not encash his National Savings Certificate upon maturity, the amount will continue to accrue interest at the rate offered by the post office savings account for a duration of two years. However, the amount will no longer earn any further interest after this period.
How to calculate the maturity amount of NSC?
To calculate the maturity amount of National Savings Certificate, you can use the following formula:
Maturity Amount = P [1 + (R/100)]^n
Where,
P is the investment amount
R is the interest rate
n is the lock-in period in years
You can also use online calculators to calculate the maturity amount of National Savings Certificate.
How to show NSC interest in income tax?
You can show the interest earned from National Savings Certificate under ‘Income from Other Sources’. You can show the NSC interest earned in one of the following ways while filing ITR:
1. You can claim a 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.
2. Don’t claim the interest earned as a 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 a 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 do not accumulate to the last year.
Does the interest rate on NSC issued remain unchanged?
Yes, the interest rate on NSC issued is fixed at the time of investment and remains unchanged throughout the investment tenure. The government determines the interest rate, which may be subject to periodic adjustments. However, any changes in the interest rate do not affect existing National Savings Certificates that have already been issued. The revised interest rate applies only to newly issued NSCs at that particular point in time.
What is a lock-in period of NSC?
National Savings Certificates have a lock-in period of five years. While early redemption is possible, it is subject to specific conditions.
Can I get a loan against NSC investments?
Yes, National Savings Certificates can be used as collateral to secure loans from banks and other government organizations.
How many NSCs can I buy?
There is no restriction on the number of NSCs that can one purchased.
How to transfer NSC from one Post Office to another?
To transfer your NSC account from one Post Office to another, you need to complete an application form and submit it either at the current branch or the desired branch. Additionally, if you hold a Joint A or B account type, all the account holders must provide their signatures on the application form.
How to check National Savings Certificate online?
To check your National Savings certificate online, you need to request the online passbook service for your NSC account at the Post Office branch. The branch executives will provide you with internet banking credentials. Once you have received the credentials, you can use them to log into your account and access all the transaction details related to your NSC account. It’s important to note that this service is only available at specific Post Office branches.
How can I find out my NSC ID?
You can obtain your NSC ID by requesting the necessary login credentials from your bank or the Post Office. These credentials will enable you to access your NSC account information online.
Can I cancel or modify a nomination for NSC?
Certainly, the nomination for the National Savings Certificate can be modified or revoked by submitting a mandatory form and paying a nominal processing fee.
What is NSC Customer Care Number?
1800 266 6868
Conclusion:
In conclusion, the National Savings Certificate (NSC) is a reliable investment option backed by the Indian Government, offering fixed returns and tax benefits. Feel free to Contact Us if you have any further queries or need assistance regarding NSC. We are here to help you make informed investment decisions.
Disclaimer:
This article provides general information only and does not constitute financial advice. Financial regulations, product terms, and industry guidelines are revised from time to time. While we have made efforts to ensure the accuracy of the information presented, we do not guarantee its completeness or accuracy. We disclaim any liability for loss or damage arising from actions taken based on the information provided in this article. To make informed financial decisions, please do your own research and consult with a qualified financial professional.
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