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Features
Ref. No. KLI/22-23/E-BB/492
The National Saving Certificate (NSC) is a government-backed, fixed-income savings scheme available through Indian post offices. NSC (National Saving Certificate Scheme) is one of the most popular investment schemes offered by post offices across India. It is a government-backed scheme that allows you to build a disciplined saving habit and earn a fixed income. If you are a risk-averse investor, knowing the NSC full form and other details can greatly help you earn a secure return and save taxes.
The National Saving Certificate or NSC is a fixed-income savings scheme that you can open with any Indian post office branch. It is a low-risk investment and saving option offered by the Government of India that encourages budding investors and people with small to medium incomes to invest and grow their wealth.
The following table offers more clarity on what is National Saving Certificate and its key details:
NSC interest rate 2024 | 7.7% compounded annually (payable at maturity) |
Minimum Investment Amount | ₹1000 and thereafter in multiple of ₹100 |
Maximum Investment Amount | NIL |
Maturity Period | 5 years |
Degree of Risk | Low-risk investment |
Tax Benefit | Available under Section 80C of the Income Tax Act up to ₹1.5 lakhs |
Who would not want to invest in a scheme offering attractive interests and tax benefits while also maintaining the security of investment? However, if you want to get started with this scheme, you should check whether you meet the eligibility criteria set by the government. In other words, you must be:
This means that non-residents are not permitted to invest in NSC. Further, all entities other than individuals, i.e., Hindu Undivided Families (HUFs), Trusts, Companies, etc, are not allowed.
In case of minors (those in the age range of 10-18 years), guardians can invest in the scheme. Similarly, in the case of a person with an unsound mind, assistance of a guardian is required.
The National Saving Certificate comes with several benefits for investors. For instance, liquidity is of great value to an individual with a medium or low income. NSC benefits allow such investors to access their money at all times. Other benefits include the following:
Investment in NSC helps generate fixed income through interest on the sum invested. For example, you can generate a guaranteed return on the NSC at a rate of 7.7% through the government’s regularized interest rate on the National Savings Scheme. This interest rate is revised on a quarterly basis.
When you invest money in the National Saving Certificate, you can claim tax benefits on investments of up to ₹1.5 lakhs. The claims are subject to Section 80C of the Income Tax Act, 1961. You should also note the NSC interest taxability rules here. The interest earned is subject to tax under ‘Income from Other Sources’ but only at the end of 5 years.
You can start investing in the National Saving Certificate Scheme with a small initial investment of ₹1,000 or any amount above that is a multiple of ₹100. After that, you can increase your investment amount when feasible.
The National Saving Certificate has a mid-term maturity period of five years. It is thus suitable for long-term financial planning purposes.
The interest rate on the National Saving Certificate Scheme allows you to get regular returns. The better part is that the interest earned on the NSC gets auto-compounded and re-invested yearly.
Subscribing to the NSC with an investment of up to ₹1.5 lakhs can result in tax savings under Section 80C. The interest received on the certificates is added to the initial investment and comes under tax deduction.
For example, if you purchase ₹1,000 in certificates, you are eligible for a tax credit on that original investment amount in the first year. However, in the second year, you can claim a tax deduction for the NSC investment(s) and the interest received in the first year.
NSC is a reliable and safe savings scheme, making it a great investment option for low-risk investors. However, if you are a high-risk investor, there are a few other options that you can explore. Some of these options might pose a little more risk but are worth considering for your financial growth in the long term.
ULIPs are modern investment tools with dual insurance benefits and investments in the same plan. They allow the policyholder to invest in a market-linked security based on their risk appetite. For example, a policyholder can opt for safer investment options like bonds if they have a low-risk appetite.
If you are looking for more options for the National Savings Scheme, you can consider the guaranteed savings plan option. In this plan, you must ensure that you invest a fixed amount every month or year for a fixed term. After this fixed term, you will get returns pre-decided at the start of the policy.
Regarding tax-saving investments, the National Savings Certificate (NSC) is one option among several others. Let’s compare NSC with some popular tax-saving investments available in the market.
Investment Option | Risk | Return | Maturity or Lock-in Period |
---|---|---|---|
NSC | Low | 7.7% p.a. | 5 years |
PPF | Low | 7.1% p.a. | 15 years |
ELSS | Market-linked | Market-linked | 3 years |
FD | Low | 7%-8% p.a. | 5 years |
ULIP | Market-linked | Market-linked | 5 years |
EPF | Low | 8.25% | Withdrawal upon retirement (specific rules prescribed for early withdrawal) |
PPF is a long-term investment plan with a long maturity period. The interest rate is variable and compounded annually, offering higher flexibility regarding investments and withdrawals. While the NSC is a fixed-income instrument with a maturity period, the NSC interest rate is fixed and compounded annually.
ELSS is a type of mutual tax-saving fund that is primarily financed in equities. It has the potential for higher returns but also carries higher market risk. On the other hand, NSC is a risk-free investment with a fixed interest rate. It does not offer any exposure to equity markets.
Tax-saving FDs are offered by banks for a fixed tenure. The interest earned is taxable. They provide fixed returns and are relatively safer. NSC is issued by the government and is considered a safe investment. For NSC, interest earned is compounded annually, but TDS is not applicable.
ULIPs are life insurance-cum-investment plans. They offer market-linked returns and life insurance coverage. On the other hand, NSC is a savings instrument and does not provide life insurance coverage.
EPF is a retirement scheme for salaried individuals. It offers tax benefits and employer contributions. On the other hand, NSC is open to all individuals and is not tied to employment.
National Savings Certificate, or NSC, is designed to encourage small—to mid-income investors to invest while saving on taxes. Let us see how to invest in NSC, both offline and online:
Head to the nearest post office that offers NSC investments. Almost all major post offices across India provide this facility
Obtain the NSC application form from the post office. Fill in all required details, such as your name, address, PAN number, and the amount you wish to invest.
Submit the filled application form and necessary documents for compliance with KYC (Know Your Customer). This typically includes
Nomination is mandatory for NSC investments. Ensure you fill out the nominee details on the application form.
Pay the investment amount. You can make payments via cash, cheque, or demand draft. The post office will issue an acknowledgment receipt upon receiving the payment.
After processing your application and payment, the post office will issue an NSC certificate in your name. Keep this certificate safe, as it will be required at maturity.
Access your Internet banking account of a bank that offers NSC investment services. Ensure your bank is authorized to provide this service.
Once logged in, look for the option related to government schemes or fixed-income investments. Under this, find the NSC investment option.
Enter the investment amount and nominee details. The online form will require details like the offline process, including personal and nominee information.
Upload scanned copies of the required KYC documents. These may include:
Proceed to make the payment online through your Internet banking account. Ensure you have sufficient balance to complete the transaction.
After completing the payment, you will receive an online confirmation. The NSC certificate will be issued digitally and can be downloaded from your internet banking account. Additionally, an email confirmation might be sent to your registered email address.
Previously, physical NSC certificates were issued by banks or post offices. However, this practice was discontinued in 2016. Now, NSC certificates can be purchased in either Passbook or electronic mode (e-mode).
The passbook mode is less popular and more tedious. You must open a savings account at an authorized bank or post office. In contrast, e-mode is more convenient. You can purchase an NSC scheme with your savings account online, provided you have activated your Internet banking. You will require the following documents to apply for NSC:
While NSCs offer several benefits, they may not be suitable for everyone. It is important to consider your personal financial goals, risk tolerance, and investment strategy before investing in any financial product. Here’s who should consider investing in NSCs:
NSCs are ideal for those with a low-risk appetite who prefer guaranteed returns over potentially higher but riskier investments. For instance, older individuals who prioritize capital protection and steady returns may find NSCs suitable for their needs.
As discussed above, investments in NSCs qualify for tax deductions under Section 80C of the Income Tax Act. It is thus an attractive for individuals looking to reduce their tax liability.
NSCs offer a balance of safety, returns, and tax benefits that can be particularly appealing to middle-income individuals.
With a 5-year lock-in period, NSCs are suitable for those who can commit their funds for the medium to long term.
The simplicity and safety of NSCs make them a good starting point for those new to investing.
Investors looking to balance their portfolio with a low-risk, fixed-income component can benefit from NSCs.
NSCs are widely available through post offices, making them accessible to investors in areas with limited banking facilities.
Like a savings plan, the National Savings Scheme also has eligibility criteria. The eligibility criteria to invest in the National Saving Certificate Scheme are as follows:
You can request a duplicate if your original NSC certificate is damaged, lost, stolen, destroyed, or mutilated. To do so, you must fill out the savings certificates form and give it to the post office where the original NSC was issued. The form’s primary fields are as follows:
The certificate(s)’ serial numbers, denominations, NSC issue, and other details.
Although the National Savings Certificate scheme has a lock-in period of 5 years, premature withdrawal is permitted under certain conditions:
If the NSC is withdrawn within one year of opening the account, no interest will be paid, and only the initial investment amount will be returned. However, if the withdrawal is made after one year, the principal amount and the accrued interest will be paid.
Beyond its basic benefits, NSC also serves as a solid option for those seeking long-term financial stability. As part of a well-diversified portfolio, NSC can provide the security and assurance that many other investment options may not. However, it is important to remember that NSC is just one part of a broader financial strategy. To maximize your overall returns and future security, you should complement NSC with other investment avenues like mutual funds, ULIPs, or even public provident funds.
Taking a diversified approach ensures that you safeguard your wealth, create potential for higher growth, and adapt to changing financial needs over time.
1
You can claim a deduction for the interest earned on NSC under Section 80C of the Income Tax Act. The interest earned on NSC is taxable in the fifth year of maturity, so you must declare it as income in your ITR.
2
NSC comes under Section 80C of the Income Tax Act. This means you can claim a deduction of up to ₹1.5 lakhs for the amount invested in NSC.
3
NSC and KVP (Kisan Vikas Patra) are government-backed savings schemes, but NSC offers a higher interest rate. The interest rate on NSC is currently 7.7%, while the interest rate on KVP is 7.5%.
4
You can redeem NSC certificates after maturity at any post office or bank. You will receive the maturity amount, which includes the principal amount and the interest earned.
5
You can get an NSC certificate from any post office or bank. You must provide your PAN card, address, and proof of identity.
6
At the current interest rate of 7.7%, it will take about 20 years for NSC to provide a maturity amount double the principal amount.
7
To check the NSC certificate online, log in to your internet banking account if your bank offers NSC services. Look for the option related to government schemes or fixed-income investments, where you should find the NSC investment section.
8
NSC provides tax benefits under Section 80C of the Income Tax Act. You can claim a deduction of up to ₹1.5 lakhs for the amount invested in NSC.
9
To find the NSC certificate number, refer to the physical certificate issued by the post office where you made the investment. It should be prominently displayed on the certificate itself.
10
You can withdraw NSC before maturity, but you must pay a penalty. The penalty is calculated as a percentage of the interest you would have earned if you had kept the NSC until maturity.
11
The minimum amount for National Savings Certificate (NSC) investment is typically set at ₹100, although this may vary depending on the issuing authority.
12
To verify an NSC certificate, you can visit any post office and provide the certificate number and holder’s details.
13
To buy NSC online, you can typically do so through authorized banking channels offering government scheme investments. Log in to your Internet banking account, navigate to the NSC investment section, fill in the required details, upload the necessary documents, pay, and receive your NSC certificate digitally.
14
Yes, there is a lock-in period of 5 years with investment in NSC.
15
NSC interest is compounded annually and added to the principal amount.
16
No, the smallest denomination for NSC is ₹100.
Features
Ref. No. KLI/22-23/E-BB/2435
The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.
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