An Indian Resident can obtain a National Savings Certificate (NSC) at any post office to save money on taxes as per the tax savings scheme under section 80. NSC is typically favored by risk-averse investors or those trying to diversify their portfolios with fixed return instruments because it offers a fixed return and is supported by the Government of India. When it comes to investments, there are numerous alternatives. You can select any of them based on your financial objectives. The National Savings Certificate i.e. NSC is a popular post office savings product. It offers a slew of advantages as a low-risk investment.
What is National Savings Certificate (NSC) Scheme
The NSC (National Saving Certificate) is a fixed-income investment option available at any post office branch. The plan is an initiative of the Indian government. It’s a savings bond that encourages subscribers – mostly low- to mid-income investors – to save while reducing their tax liability. The scheme’s principal goal is to encourage people to save modest or medium amounts of money while also providing tax benefits. The dangers of investing in the scheme are low because it is supported by the Indian government.
This fixed-income product, like the Public Provident Fund and Post Office FDs, is a low-risk fixed-income product. You can get it in yourself, for a juvenile, or as a joint account with another adult at your local post office.
The maturity time for NSC is set at five years. The purchase of NSCs has no upper limit, but only investments of up to Rs.1.5 lakh qualify for a tax credit under Section 80C of the Income Tax Act. The certificates earn a fixed rate of interest, which is presently 6.8% per year. The government adjusts the interest rate on a regular basis.
Eligibility for the NSC
The following are the main requirements for acquiring National Savings Certificates:
- The person must be a citizen of India.
- Non-resident Indians are not permitted to invest in NSC.
- Individuals can purchase an NSC on behalf of a minor or invest with another adult.
- Individuals of any age can obtain a certificate because there is no age restriction.
- HUFs and Trusts are not permitted to invest in the scheme under the NSC VIII Issue.
NSC’s Features and Benefits
- Tax saver: Under Section 80C of the Income Tax Act, 1961, you can claim up to Rs 1.5 lakh as a government-backed tax-saving scheme.
- Fixed income: At the moment, the scheme is providing investors with a guaranteed return of 6.8%. NSC has historically provided higher returns than FDs.
- Access: This programme can be purchased at any post office by presenting the required documentation and following the KYC verification process. It’s also simple to move the certificate from one post office to another.
- Compounding’s power: By default, the interest you receive on your investment is compounded and reinvested, even if the returns do not outperform inflation.
- Early exit: In most cases, it is not possible to exit the scheme early. They will, however, accept it in extreme circumstances such as the death of an investor or if a court order is in place.
- Types: There were two sorts of certificates in the scheme at first: NSC VIII Issue and NSC IX Issue. In December 2015, the administration ended the NSC IX Issue. So far, just the NSC VIII Issue is available for purchase.
- Begin small: You can start with as little as Rs 1,000 (or multiples of Rs 100) and gradually grow your investment.
- Nomination: In the tragic event of the investor’s death, the investor might nominate a family member (even a minor) to inherit the money.
- Loan collateral:NSC is accepted as collateral or security for secured loans by banks and NBFCs.To do so, the responsible postmaster should stamp the certificate with a transfer stamp and provide it to the bank.
- Corpus after maturity: After you reach maturity, you will get the full maturity value of your corpus. Because no TDS is deducted from NSC payouts, the subscriber is responsible for paying the necessary tax.
Investing in NSC (National Saving Certificate)
The government has made NSC widely available to potential investors by placing it at post office offices across the country.NSC provides interest guarantees as well as comprehensive capital protection. Anyone looking for a safe way to make a consistent return while avoiding taxes might consider investing in NSC. However, unlike tax-saving mutual funds and the National Pension System, they are unable to generate inflation-beating returns. Individuals can save via the National Savings Certificate, which is supported by the government. As a result, Hindu Undivided Families (HUFs) and trusts are unable to invest. NSC certifications are also unavailable to non-resident Indians (NRIs).
National Savings Certificate Holding Options
The following are the many ways to hold a National Savings Certificate:
- Single Holder Type Certificate: A single holder certificate can be obtained by an investor for themselves or on behalf of a minor.
- Joint A Type certificate: In this scenario, the certificate is owned jointly by two investors who share the maturity proceeds equally.
- Joint B Type certificate: This certificate is also a joint holding certificate, but only one of the holders receives the maturity proceeds.
NSC (National Saving Certificate) Tax Advantages
A tax credit of up to Rs 1.5 lakh can be obtained by investing in the National Savings Certificate under Section 80C. In addition, the interest received on the certificates is added back to the original investment and is tax-deductible. For example, if you invest Rs 1,000 in certificates, you will be eligible for a tax credit on that amount in the first year. However, you can claim a tax deduction for both the NSC investment(s) and the interest collected in the first year in the second year. This is because interest is compounded annually and added to the original investment.
Open a National Savings Certificate at the Post Office
To open an NSC (National Saving Certificate) at the Post Office, follow the below-given steps:
- Pay a visit to the nearest Post Office.
- Fill out the application form and attach any required documents.
- Make a cash, check, or money order payment to the NSC account.
- An acknowledgement will be issued once the procedure is completed.
Filling up a National Savings Certificate NSC Scheme
- Complete the application form with the necessary information, such as the name of the Post Office branch, your Post Office savings account number, and the applicant’s name.
- Paste the applicants’ photos into the box and choose the account you want to open from the drop-down menu, i.e., ‘NSC VIIIth issue.’
- From the drop-down menus, choose the account holder type and account type.
- In the instance of a ‘Minor through Guardian,’ complete table 1 with the minor’s information.
- In figures and phrases, specify the amount you want to deposit to open the account. If you’re sending a check or a DD, please provide the serial number and date.
- In table 2, fill in all of the candidates’ personal and contact information.
- At the bottom of the page, all candidates must sign their names and append their signatures.
- Next, go to the ‘Nomination’ box and fill in the names of the applicants and the nominee. Provide information such as the applicant’s relationship to the nominee, the nominee’s full address, Aadhaar number, and other facts in the table supplied.
- If the applicants are illiterate, include the signatures of two witnesses in addition to the applicants’ signatures.
Comparing NSC to Other Tax-Deferred Investments
Under Section 80C of the Income Tax Act of 1961, NSC is one of the tax-saving investment choices. Equity Linked Savings Schemes (ELSS), National Pension System (NPS), Public Provident Fund (PPF), and Tax-saving Fixed Deposits are some of the other popular options (FD). NSC is compared to other tax-saving investments in the table below:
|S. No.||Investment||Interest||Lock-in Period||Risk Profile|
|1||PPF||7.1% p.a.||15 years||Low-risk|
|2||NSC||6.8% p.a.||5 years||Low-risk|
|3||ELSS funds||Market-linked, historical returns show 12% to 15% p.a.||3 years||Market-related risks|
|4||FD||4% to 6% p.a.||5 years||Low-risk|
|5||NPS||Market-linked, historical returns show 8% to 10% p.a.||Till retirement||Market-related risks|
Declare NSC Interest on Income Tax
It is essential that you use one of the approaches listed below throughout your time on the NSC. Experts choose Method 1 because the interest and revenue will be dispersed throughout the term rather than accumulating in the final year.
When completing your ITR, you can show the NSC interest you earned in one of the following ways:
- Under ‘Income from Other Sources,’ you can show the interest earned from NSC.
- You can deduct interest from your NSC account, but you don’t have to declare it as income. In this situation, you can count all of your interest income from previous years as income in the current year.
- You can’t deduct or claim the interest you’ve earned. In this situation, all interest generated in the previous year will be reported as “Income from Other Sources.” Only the interest from the first four years will be deducted.
Formula for Calculating NSC Interest
You should be aware that NSC interest is compounded annually. To determine the principal amount for the second year, add the interest you calculated on the primary amount invested in NSC to the principal amount. You can use an interest calculator to compute simple and compound interest.
Cash in/Redeem NSC Certificates on Reaching Maturity
When the NSC reaches maturity, it can be cashed at any Post Office branch, not just the one where the account is stored. You must submit an application with facts such as serial number, issuance date, complete name, registered and current address if you want to withdraw money from a branch that is not your account’s home branch. You must bring the following documentation with you when you want to cash the maturity amount:
- Identity evidence
- NSC encashment form
- Original NSC certificate
- After receiving payment, the individual entitled to receive the encashment must sign behind the certificate.
Link NSC to Aadhaar Number
Aadhaar can be linked to any Post Office Savings Scheme, both online and offline. Here’s how to do it on the internet:
- To access your NSC account, log in to your internet banking account using your User ID and password.
- On the home page, select the ‘Aadhaar Number Registration in Internet Banking’ option.
- Click on ‘Confirm’ after entering your 12-digit Aadhaar number.
- After that, select the account to which Aadhaar should be linked.
Move NSC to a Different Post Office
To move your NSC account from one Post Office branch to another, you must fill out an application at either the old or new location.
In the case of a Joint A or B account, the application must also have the signatures of all account holders.
Find the NSC Certificate Number
The NSC certificate number will appear on the certificate itself. It is recommended that you write down this certificate number somewhere so that if your original certificate is lost or stolen, you can request a duplicate certificate using this number.
Get NSC before it Matures
NSC has a 5-year lock-in duration, which means it can’t be withdrawn before it matures. Only in the following conditions can NSC be withdrawn early as an exception:
- When a pledgee is a Gazetted official, the pledge is forfeited.
- When a single account, or any or all of the account holders in a joint account, passes away
- on the court’s order
What Exactly is the NSC VIII Problem
NSC was previously available in two versions: NSC VIII and NSC XI. The former had a five-year term, whereas the latter had a ten-year term. The latter, however, is no longer available. As a result, only an NSC VIII issue with a 5-year term is now available for subscription.
NSC or KVP, Which is superior?
The two schemes—National Savings Certificate (NSC) and Kisan Vikas Patra (KVP) work in very different ways and have very different goals. Here’s a comparison table to help you see the difference.
|S. No.||Eligibility||Resident Indians only||Only Resident Indians and Trusts|
|1||Interest Rate (Q4 of FY 2020-21)||6.8% p.a.||6.9% p.a.|
|2||Minimum Deposit Amount||Rs.100||Rs.1,000|
|3||Maximum Deposit Amount||No limit||No limit|
|4||Tax Benefits||Available||Not Available|
|5||Investment Tenure||5 years||124 months (Q4 of FY 2020-21)|
|6||How to Subscribe||At Post Office branches||At Post Office and participating bank branches|
|7||Premature Withdrawal||Not allowed||Only after 30 months from the date of investment|
Section 80C of the Income Tax Act of 1961 allows you to deduct the money you put into NSC.
The National Savings Certificate, or NSC, is a government-backed fixed-income investment scheme. Small and medium-income investors can save money on taxes while generating profits by purchasing a savings bond. This is a safe and risk-free product.
You can’t subscribe to NSC online right now. To open an NSC account, you must go to the nearest Post Office and fill out the NSC application form and submit it to the executive.
At the current return rate of 6.8% p.a., it will take around 10.5 years for NSC to double your investment.
An Rs.1,000 minimum deposit is required to open an NSC account. You can deposit in multiples of Rs.100 if you want to deposit a larger sum. The amount you can deposit has no upper limit.
Under Section 80C, both ULIPs and NSCs give income tax deductions on the principal invested.