All about National Savings Certificate (NSC)

What is National Savings Certificate

The National Savings Certificate (NSC) is a fixed-income investment option that can be created at any post office. It’s a low-risk product that’s also safe.

A National Savings Certificate (NSC) is a tax-saving investment that an Indian resident can obtain at any post office. NSC is often favoured by investors or those wishing to diversify their portfolios using a fixed return instrument due to its set return and minimal risk. 

You can purchase an NSC plan at your local post office in your name, on behalf of a child, or in a joint account with another adult. NSC has a set maturity of 5 years. Although there is no upper limit on the purchase of NSCs, only investments up to Rs.1.5 lakh qualify for a tax deduction under Section 80C of the Income Tax Act. Certificates yield a set rate of interest, which is presently 6.8 percent per year. The government adjusts the interest rate regularly.

NSC interest rate 2022

Each quarter, the Ministry of Finance publishes the NSC interest rates. The interest rate on the NSC plan is now 6.80 per cent (April-June 2022). The Finance Ministry has maintained the NSC interest rate at the same level as the previous quarter. The following table details the NSC scheme’s historical interest rates.

 Interest is accumulated yearly but is paid at the certificate’s maturity date. Returns are automatically reinvested as a result of interest compounding. NSCs occur when the interest generated on the principal amount is reinvested. As a result, it qualifies for a deduction under section 80C of the Income Tax Act 1961, up to a maximum of INR 1,50,000. As the Government of India backs the initiative, interest rates are identical throughout all post offices.

NSC eligibility

The following are the qualifying requirements for investors interested in purchasing the NSC:

• The person must be a citizen of the Republic of India.
• Individuals who want to obtain a certificate are not restricted by age restrictions.
• NRIs are not permitted to invest in NSC.
• Individuals may purchase an NSC on behalf of a child by partnering with another adult or investing with other individuals.
• HUFs and trusts are not eligible to participate in the NSC VIII Issue since it is a government-sponsored plan.

National Savings Certificate: Modes of holding 

The following are the many ways in which you may hold a National Savings Certificate:

Single holder type certificate

Investors who want to acquire a single holder certificate might do so for their benefit or on behalf of a minor.

Joint A Type certificate

In this instance the certificate is held by two investors, each of whom will get an equal portion of the maturity funds.

Joint B Type certificate

This certificate is likewise a joint holding certificate, but the maturity profits are distributed to just one of the certificate holders.

NSC Features

The key features of the scheme are:

Minimum investment

A National savings certificate may be acquired for as little as Rs 100. The National savings certificate is available in the amounts of Rs.10,000, Rs.5,000, Rs.1,000, Rs.500, and Rs.100. Small contributions can be made initially, and people can expand their investments as they see fit.

Maturity tenure

Applicants can select between a five-year and ten-year maturity terms for the plan.

Rate of interest 

Currently, the interest rate has been cut from 7.9 percent to 6.8 per cent, and the interest is compounded annually. However, interest is only due at maturity. For instance, an applicant who invests Rs.100 would get Rs.146.93 after five years.

Loans against NSC

The NSC can be used as security or collateral to get loans from banks. However, the transfer of the certificate to the bank must be authorised by the appropriate postmaster.

Purchase of NSC

The plan can be acquired at post offices after presenting the relevant documentation.

Nominations 

The investor can add family members, including minors, as candidates. If the investor dies during the plan’s duration, the nominee will be entitled to inherit the scheme.

Transfer of certificate

NSC transfer from one post office to another is feasible. It is also possible to transfer a certificate from one person to another. However, the certificate will stay the same, with the new owner’s name in capital letters and the previous owner’s name rounded.

NSC: Benefits

One of the primary benefits of participating in the NSC is the tax incentives available to people on their contributions. Additionally, this approach guarantees returns. Many people choose the NSC plan because it might offer a steady income stream after retiring. The following are the primary benefits of investing in the NSC: 

• Except for interest earned in the last year, the remainder of the interest earned is tax-free.
• Individuals who lose their original certificate may acquire a duplicate.
• Individuals can continue to invest in the programme once it matures.
• The certificate may be transferred from one person to another. It is permitted, however, just once during the lock-in term.
• The money earned is compounded annually and reinvested in the plan. As a result, the individual’s investment grows without purchasing certificates.

NSC: Tax benefits provided 

Investment in the NSC provides people with the following tax benefits:

• Tax savings of up to Rs.1.5 lakh can be reaped by investing in the NSC under Section 80C of the Income Tax Act, 1961.
• The interest earned annually by investing in the NSC is taxed as a fresh investment.
• TDS does not apply to the National Savings Certificate. However, under marginal income tax rates, the interest generated must be taxed.

Loan against National Savings Certificate

You may well be entitled to borrow against your National Savings Certificate assets, subject to the following important terms and conditions:

• Only resident Indians are eligible to apply for a loan against their NSC.
• This facility is now available from a few prominent commercial and public sector banks.
• The margin required for a loan against NSC is determined by the remaining time till maturity.
• The interest rate charged on NSC investments varies according to the loan applicant and the bank providing the loan.
• The loan term is equal to the residual maturity (amount of time left before the NSC is paid off) of the NSC utilised as collateral.

The above are some of the essential characteristics of a loan against NSC; however, particular features like margin, interest rate, and term tend to differ across lenders.

NSC versus other tax-saving investments

NSC is a tax-advantaged investment option under Section 80C of the Income Tax Act, 1961. Other popular choices include equity-linked savings schemes (ELSS), the National Pension System (NPS), the Public Provident Fund (PPF), and tax-advantaged fixed deposits FDs). The following table compares NSC to other tax-saving investments:

Obtaining NSC application form from post office

There are two National Savings Certificates (NSCs) types: Issue VIII and Issue IX. Form 1, Form A, or NC-71 refers to the application form. The post office’s website has a link to this form. There are several forms available for applying, transferring, nominating, and withdrawing funds from your NSC account, and performing other account-related chores. These forms may be accessed on the post office’s official website. The forms are available for download, completion, and submission following the criteria.  

What is the NSC VIII form?

Previously, NSC was available in two types: NSC VIII with a 5-year term and NSC XI with a 10-year term. However, the NSC XI  has been phased out. Only the NSC VIII issue with a 5-year term is now accessible for registration.

NSC: Documents required

The following documentation must be supplied to acquire an NSC:

• Investors must produce an original form of identification such as a passport, a Permanent Account Number (PAN) card, a voter identity card, a driver’s licence, a senior citizen identification card, or a government identification card for verification.
• Passport size photograph of the investor is required.
• Investors must produce evidence of address in the form of a passport, telephone bill, energy bill, bank statement, a check and a Certificate or Post Office-issued ID card.

NSC application form: How to fill?

• Add the necessary information, including the name of the Post Office branch, the number of your Post Office savings account, and the applicant’s name.
• Paste the applicants’ photographs and pick the account you want to establish from the choices, e.g. ‘NSC VIIIth issue’.
• Choose an account holder type and an account type from the list of options available. 
• In the event of ‘Minor via Guardian,’ provide the minor’s information in table 1.
• Specify the amount you want to deposit to start the account. If you give a check or demand draft, please provide the serial number and date.
• Now, complete table 2 with all the investors’ personal and contact information.
• All investors must include a signature at the bottom of the page in addition to their names.
• Following that, go to the ‘Nomination’ area and input the applicants’ and nominees’ names. Provide data in the table given, such as the applicant’s connection to the nominee, the nominee’s complete address, and Aadhaar number.
• In the event of illiterate applicants, provide the signatures of two witnesses in addition to the applicants’.

NSC certificate number: How to find?

The certificate will include the NSC certificate number. It is suggested that you keep a record of this certificate number somewhere safe so that you may apply for a duplicate certificate using this number if your original certificate is lost or stolen.

NSC: Procedure for withdrawing before NSC 

When you buy a National Savings Certificate (NSC), you’ll be locked in for five years. Premature withdrawal of NSC is only permitted in the following conditions as an exception:

• Upon the passing of a single account holder or any or all of the joint account holders,
• When a pledgee who is a Gazetted official forfeits their pledge,
• On the recommendation of the court

How to merge NSC and Aadhaar?

Aadhaar can be linked to any Post Office Savings Scheme online or offline. You may do so online in the following manner: 

• Log in to your online banking account using your User ID and password.
• On the main page, click the ‘Registration of Aadhaar Number in Internet Banking’ option.
• Complete the form by entering your 12-digit Aadhaar number and clicking ‘Confirm’.
• Select the account to which you want to attach Aadhaar and click Connect.

NSC: How can I move my NSC to another post office?

To transfer your National Savings Certificate account from one Post Office branch to another, you must file an application at either the old or new office. Additionally, in the case of Joint A or B accounts, the application must include the signatures of all account holders.

How to make an NSC pledge? 

The NSC certificate can only be pledged to:

• President/Governor.
• Regulated Financial Institutions (RBI/Scheduled Bank).
• An organisation (public or private), a government agency, or a municipality.
• A financial institution dedicated to the financing of housing.

 Step 1 

Form NC41 must be completed and signed by both the pledger and the pledgee before turning it in to your local Post Office branch.

Step 2

The application must be submitted in person at a Post Office branch with the original certificate.

Step 3 

When your application is processed, the PostMaster will stamp the certificate with the words “Transferred Security to” in red, along with the date and signature of the applicant. The same may be subject to a fee.

Who should invest in NSC scheme?

Investors seeking a fixed income stream at regular intervals with a guaranteed interest rate and a low-risk investment opportunity while simultaneously saving taxes can consider investing in the NSC Scheme.

While the system offers the aforementioned advantages, it also has drawbacks, such as lower interest rates and a lack of inflation adjustment. It does not give inflation-bearing returns, unlike tax-saving mutual funds and the National Pension System (NPS). It is, however, entirely dependent on the financial objectives of the investor.

The government has made every effort to make the plan as accessible as possible to potential investors. It is accessible at all post offices, and the registration procedure is simple and straightforward.

FAQs 

Anil Shah

Anil Shah, is your go-to source for property market insights. He excels at understanding and explaining the latest trends in residential real estate and making complex real estate concepts easier to grasp. Anil’s fact-based analysis helps buyers and investors make sound decisions in the housing sector.

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