Everything You Need to Know about National Savings Certificate

NSC, short for National Savings Certificate, is a fixed-income investment scheme sponsored by the Government of India. A savings plan that is specifically intended to cater to the needs of the common man, NSC has gained immense popularity with small investors due to guaranteed returns, tax benefits, and its low-risk profile. The article explains the essentials of the National Savings Certificate, including features, benefits, eligibility, and its comparison with other savings instruments. Let's discuss why the NSC remains a popular investment option for millions of Indians.

What is the National Savings Certificate (NSC)?

The National Savings Certificate is a government-backed savings bond offered for purchase at post offices across India. It is an assured, fixed-return investment product designed to motivate the individual to save for their future. The NSC is particularly popular among risk-averse investors who desire steady income, Guaranteed Future Plan and tax saving.

NSC is offered in two maturity periods:

• 5-Year NSC (NSC VIII Issue): This is the most widely subscribed variant.
• 10-Year NSC (No longer offered): This is not offered as a subscription.

Features of National Savings Certificate

• Guaranteed Returns

  NSC gives fixed returns that are ascertained by the government. The interest rates are changed every quarter, but once you invest, the rates get locked.

• Tax Benefits

  Section 80C of the Income Tax Act allows for a deduction for investments made in NSC. The annual deduction can be up to ₹1.5 lakh.

• Low-Investment Scheme

  The minimum investment in NSC is just ₹100. Thus, this investment scheme is accessible to small savers. There is no maximum limit on investment making it a Super Saver Plan.

• Interest Accrual

  Interest on NSC is compounded annually but is payable at maturity. So, the interest accrued gets re-invested and thereby increases your savings over time.

• No TDS on Maturity

  The maturity amount does not attract TDS, but the interest accrued will be taxed as per your income slab.

• Nomination Facility

  Investors can nominate a beneficiary, so the transfer of the investment will be free from hassle in case the investor dies.

• Loan Against NSC

  NSC can be used as security to obtain loans from banks and financial institutions.

Eligibility Criteria

You can apply for a National Savings Certificate under the following conditions:

• Eligibility Residence: NSCs are available to Indian citizens, and NRIs cannot apply.
• Age Requirement: Minor persons can apply in conjunction with a guardian; however, there is no upper age limit.
• Investor Types: Institutions/Trusts can not apply under the category of NSC.

Benefits of Investing in National Savings Certificate

• Risk-Free Investment:
  Being backed by the Government of India, it offers complete security.
• Regular Compounding:
  It means you are earning returns in a manner that higher is returned at maturity compared to simple interest investment.
• Tax Savings:
  Not only is tax saving possible under Section 80C, but interest reinvested in the first four years of the NSC also is allowed for a deduction.
• Liquidity through loans
  While NSC has a fixed lock-in period, you can still use it to get collateral loans and provide for liquidity whenever required.
• No maximum investment amount
  It has no maximum investment amount, thus offering flexibility in creating investments towards any financial target.

How to Invest in National Savings Certificate

• Visit the Post Office:
  NSC can be availed in India at the various branches of post offices. Approach your nearby post office for the purchase procedure.
• Application Form to be Filled
  Duly fill up the application form for NSC mentioning personal details, PAN Card details, and nomination particulars.
• Submission of KYC Documents
  Attach a Photocopy of your identification proof such as Aadhar/PAN/Passport along with proof of Address
• Payment
  You will need to pay cash/drawing cheque or demand draft towards the purchase of the certificates of NSC

On successful payment and verification, the post offices give an e-certificate or physical certificate.

Benefits of Investing in National Savings Certificate

• Risk-Free Investment
  The safety of the NSC investment is unmatched since it has the backing of the Government of India.
• Compounding
  Because of compounding, you get a higher amount when the investment matures than any simple interest investment.
• Save Tax
  You save tax under Section 80C and also pay less tax on the interest reinvested for the first four years.
• Loan Facility
  After opening an NSC, you can borrow against that investment.
  While NSC has a fixed lock-in period, you can use it as collateral for loans, so liquidity is available when needed.
• No Maximum Investment Limit
  You can invest as much as you want, so this is a very versatile instrument for different financial goals.

What is the maturity period and premature withdrawal rules for NSC?

A National Savings Certificate has a fixed maturity period of 5 years. You can't draw the amount prematurely before its maturity period is over. Interest on the invested amount based on the fixed interest rate will be received by you at the time of its purchase. However, in exceptional cases, banks or post offices may agree to allow the premature withdrawal of the NSC amount. Such instances may be related to the death of an investor or a court order.

Now that you have an idea about the National Savings Certificate and how it benefits your portfolio, you can plan your investment in the scheme. Since the maturity period for this scheme is only five years, these are best suited for conservative investors looking to invest in a short term. Therefore, if you want an investment option with a higher return than a traditional FD, you can consider NSC.

National Savings Certificate is one of the savings instruments in which, with the acceptance of the government, provides safety on savings under the government's guarantee. Being a safe instrument, it compounds and provides returns with tax advantages, so it makes for a rational investment for a diversified investment portfolio. Perhaps it might be helpful when saving to meet short-term goals or to save against taxes.