NSC (full form – National Savings Certificate) is a fixed income investment scheme that offers tax benefits up to Rs.1.5 lakh under Section 80C. The Government of India has introduced this savings bond to encourage investment among individuals. NSC scheme is a low-risk post office small savings scheme that requires a minimum investment amount of Rs.1000. The current NSC interest rate stands at 7.7%.
An NSC is an Indian Government savings bond that also offers tax-saving benefits. NSC is also a low-risk investment option, which is a part of the postal savings system. NSC is a great investment option for risk-averse investors who want a fixed income. The National Savings Certificate can be bought by an adult or two adults jointly or for a minor. NSC has a lock-in period of 5 years at an interest rate of 7.7% p.a.
Individuals seeking a low-risk investment option to fetch stable interests can opt for NSC. The government has launched this tax-saving option for individuals. So, trusts and HUFs (Hindu Undivided Families) cannot avail of it. Further, NRIs are not eligible for this scheme. Only resident individuals of India can invest in NSC.
National Savings Certificate offers complete capital protection and guaranteed interest. Although it does not generate substantial returns like tax-saver mutual fund schemes, there are many advantages to this scheme. Take a look at the features and benefits of this scheme in the following section.
Following are the key highlights of a National Savings Certificate scheme:
The following are the eligibility requirements that one must fulfil to invest in NSC:
Under Section 80C, a subscriber can get up to Rs.1,50,000 as a tax deduction for investing in NSC. Further, interest from this scheme gets added back to a subscriber’s original investment. Thus one can earn an income tax break.
Suppose an individual buys certificates amounting to Rs.1,000, he/she will qualify for a rebate of Rs. 1,000 during the first year. However, during the second year, he/she may claim a deduction for the investment that year and the interest during the first year. That’s because this interest gets added back to the initial investment amount.
You can calculate interest on NSC using an easy online NSC interest calculator. An online calculator makes use of the following details:
Based on when the NSC was bought, a calculator will automatically fill in the interest rate.
Naina purchased NSC on July 1, 2019, and she invested Rs. 1 lakh. The lock-in period is 5 years, and the interest rate is 7.7% per annum. Let’s get the calculations from the following chart!
|Investment Amount (in Rs.)
|Interest Earned for the Year (in Rs.)
|Total Interest Earned (in Rs.)
|Total Sum (in Rs.)
Hence, Naina will receive Rs.1,46,254 after the maturity of the certificate. She will earn an interest of Rs.46,254 over 5 years.
If you want to encash NSC post maturity, you may do so by visiting the relevant post office branch from which you have bought the certificate. You need to furnish and submit the certificate transfer form to the required authority.
You may also request other post office branches, provided you furnish certain additional details related to the certificate. If a certificate is bought on a minor’s behalf, the initial buyer must sign the certificate. Further, the minor’s legal guardian should attest to it.
If you have directly purchased a certificate, you have to sign your certificate and submit the transfer form after receiving the required amount.
National Savings Certificate is one of the popular tax-saving investment options under Section 80C. The other well-known investment options under this Section are tax-saving fixed deposits, PPF (Public Provident Fund), NPS (National Pension System) and ELSS (Equity Linked Savings Scheme). Let’s compare NSC with other tax-saving schemes to understand if it is better.
|3% – 8% p.a.
|Low to high risk
|Depends on the performance of the scheme (could be between 8%-10%)
|Depends on the performance of the mutual fund scheme
Before we come to a conclusion, let’s compare NSC with KVP. Check the next section.
Both KVP and NSC are savings schemes. The Government of India issues NSC, while the Indian Postal Service offers Kisan Vikas Patra (KVP). Here are the differences between the two:
|How to Subscribe
|At authorised bank branches or the post office
|At a post office branch
|Post 30 months from the date of investment
|Interest Rate (2nd quarter of FY 2022-23)
|Maximum Deposit Amount
|Minimum Deposit Amount
|Only trusts and resident individuals
|Resident individuals only
You may choose to invest in a Government savings bond like NSC as the lock-in period is low, provides tax benefits and is safe. It can help you meet your 5-year financial and tax-saving goals. However, you may also consider investing in other tax-saving instruments like PPF or tax-saving mutual funds (ELSS) to get better returns with a lock-in period of 15 years and 3 years respectively.
Ans: At present, an individual can’t subscribe to National Savings Certificate online. You have to approach a nearby post office branch to furnish the application form. Once you have filled in the required details, submit it to an executive to open your NSC account successfully.
Ans: You can show the interest on NSC while filing income tax returns through one of the ways given below:
Do not claim your interest as income or deduction. Under this case, your interest will fall under other sources of income during the previous year. Just interest of the first 4 years will be applicable as a tax deduction.
You may claim a deduction on NSC interest but don’t showcase it as earnings. In this case, you may consider your interest income over the years as earnings during the previous year.
You may showcase your NSC interest under income from other sources.
Ans: You can find the National Savings Certificate number on your certificate. Remember to note down the certificate number. In case the original certificate gets stolen/lost, you can get a duplicate certificate using this number.
This article is solely for educational purposes. Navi doesn't take any responsibility for the information or claims made in the blog.
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