National saving certificate (NSC) is a fixed income investment scheme. The national saving certificate is issued by the Government of India.
Any Indian citizen can easily Buy NSC with the post office and save income tax under section 80C.
Table of Contents
What is a National Saving Certificate?
National Saving Scheme is a Government of India, one time investment scheme.
Here, you deposit a lump sum amount and purchase an NSC certificate.
At the end of the 5 years to submit the certificate and get the maturity amount deposit amount plus Interest
Who can invest in NSC Scheme
Indian residents of any age can invest in national saving certificate scheme.
You can purchase it in your name, joint name, and on behalf of a minor also.
Who cannot invest NSC
- Hindu undivided family/ H U F
- Trust
- private and public limited companies
- Non-Resident Indians
Is NSC good investment
NSC is a secure and low-risk product for risk-averse investors.
If you do not want to take any risk and are looking for capital safety, diversification of your portfolio than NSC is best for you.
NSC is a very good investment option for one time lump sum investment for those looking for a safe secure returns.
Where can I buy National Saving Certificate
- Indian residents can buy NSC from any post office
- All public sector banks
- ICICI bank
- HDFC Bank and
- Axis Bank
If you have a savings bank account and have internet banking with a bank, you can buy a National Saving Certificate in E mode also.
Earlier when you purchase NSC, you get a physical printed NSC certificate.
But now, the physical certificate has been discontinued effect from 1 July 2016.
NSC is issued in passbook or E mode only.
Documents required to purchase National Savings Scheme
- NSC application form
- identification proof such as
- passport
- permanent account number
- voter ID
- driving license
- senior citizen ID
- Government ID for verification
- photograph
- Address proof such as Life insurance
- Electricity bill
- passport
- Telephone bill
- bank statement
- Cheque.
National Saving Certificate interest Rate
NSC interest Rate 2023 has a fixed interest of 7.7%. (interest rate is revised every quarter by the Government of India).
But once you purchase NSC, your interest rate remains fixed for 5 years.
For every new purchase interest rate may be different.
National Savings certificates maturity
national savings certificates matures after 5 years.
You get the deposited amount ( principal amount) and interest of 5 years.
Tax saving while purchasing NSC
NSC qualifies for tax saving under section 80c of income tax act 1961.
You can invest up to Rs 1.5 Lakh in a financial year to get a tax deduction.
However, there is no upper limit to purchase NSC.
Minimum and Maximum Amount
You can invest as low as Rs.100.
There is no upper limit to investment. You can invest any amount you wish to.
Loan collateral
NSC certificate can be kept as Collateral or security in banks and NBFC.
if you keep, NSC as a loan Collateral then a transfer stamp is put on the certificate and it is transferred to the bank.
Is TDS deducted on NSC?
There is no TDS deduction on NSC.
However, you should pay applicable tax on NSC while filing your income tax returns or paying advance tax.
What happens to NSC after Maturity.
After maturity i.e. after completion of 5 years, you get your principal amount, and interest and certificate cease to exist.
Premature closure of NSC Account
You can close NSC prematurely before the maturity period.
It is allowed in below-mentioned circumstances
- Death of account holder
- ordered by Court of law
Tax benefit on NSC investment
You can invest any amount in NSC but you will get tax deduction up to Rs 1.5 Lakh in a Financial year under section 80C of Income Tax Act 1961.
NSC interest income is fully taxable but deemed to be reinvested added back to the initial investment, and therefore also eligible for tax benefit subject to the overall annual limit of 1.5 Lakh.
However, 5th-year interest is not reinvested and therefore taxable as per the investors’ applicable slab rate.
Suppose Rakesh invested Rs.1.5 Lakh in NSC and he will get interest as described in the below table.This interest will be added to his income and taxed as per his tax slab rate.
| YEAR | AMOUNT DEPOSITED | INTEREST EARNED | YEAR END BALANCE |
| 1 | 1,50,000 | 11550 | 161550 |
| 2 | 0 | 12439 | 173989 |
| 3 | 0 | 13397 | 187386 |
| 4 | 0 | 14428 | 201815 |
| 5 | 0 | 15539 | 217355 |
| TOTAL | 1,50,000 | 67355 | 217355 |
https://bestinvestindia.com/public-provident-fund-ppf-withdrawal-rules/
Comparing NSC with other tax-saving schemes
There are many other options to save tax such as ELSS/equity linked savings scheme, fixed deposit, life insurance policy, public provident fund, etc. For details https://bestinvestindia.com/top-5-post-office-tax-saving-scheme/
