All About National Saving 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.

Who is Eligible to Invest in NSC?

Only Individuals who are Resident Indian Citizens can invest in NSC.

The following people are not allowed to make investment in NSC-

• Non-resident individuals
• Hindu Undivided Family
• Company
• Firm
• LLP
• AOP/BOP
• Co-operative Societies
• Trust

Features & Benefits of NSC

• 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.
• 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.
• 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.
• 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.
• 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.
• Maturity period: The maturity period is five years.
• 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.
• 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.
• Power of compounding: The interest you earn on your investment gets compounded and reinvested by default, though the returns do not beat inflation.
• 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.
• 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.
• 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.

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 acknowledgment of the same will be provided marking the initiation of your NSC account.

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 the 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 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 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.

What is the lock-in period and 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