National Savings Certificate (NSC)

National Savings Certificate (NSC) is a fixed-income savings scheme offered by India Post and backed by the Indian government. It is a reliable small savings scheme in the country, as the government manages the fund corpus and takes responsibility for the safety of investors’ investments. You can open a post office account and start investing in NSC in any branch. Let’s explore how it works and the advantages it provides.

What is the national savings certificate?

The National Savings Certificate (NSC) is a government-backed small savings scheme provided by post offices across India. It was introduced on 8th May 1989. It has a fixed maturity period, which is currently 5 years. Investors get a fixed return in the form of interest. The interest rate is determined by the Indian government only and is updated at regular intervals. Nomination facility and tax* benefits under 80C up to ₹1.5 lakhs are available, making it a suitable investment option.

Features and benefits of NSC

The key features of NSC scheme include the following:
 

What documents are required to invest in NSC?

The following documents must be submitted to invest in NSC:
 

• Duly filled NSC application form

• Identity proof such as PAN, driving licence, Aadhaar card, etc.

• Address proof such as voter ID, Aadhaar card, passport, etc.

• Investment amount in cash or by cheque.

You will also need to provide the latest colour photograph.

Eligibility criteria for national savings certificate

The eligibility criteria for NSC are as follows.
 

• Indian citizenship: Only Indian residents are allowed to invest in NSC. NRIs cannot avail this facility.

• Individual investments: Adults individually or jointly (up to three people) and guardians on behalf of minors or mentally impaired people can invest in NSC.

• Restriction on companies and groups: Both private and public listed companies, as well as Hindu Undivided Families (HUFs), are not allowed to invest.

Moreover, if an individual becomes an NRI after investing in NSC, they can retain the investments till maturity.

Steps to invest in NSC?

Investing in a fixed-return investment options like NSC often helps secure stable returns. Here are the steps to invest in NSC.
 

Offline:

Step 1: Obtain the NSC application form from a post office branch or download it online from India Post website.

Step 2: Fill out all the required details carefully.

Step 3: Submit the filled form along with the self-documents needed for completing KYC.

Step 4: Deposit the amount you want to invest via cheque or cash payment.

Step 6: Get the NSC certificate from the post office upon approval.
 

Online:

Step 1: Visit the online banking account of the Department of Posts (DOP) and log in.

Step 2: Click on 'Service Requests' located under the 'General Services' section.

Step 3: Select "New Requests"  and then "NSC Account - Open an NSC Account (For NSC)".

Step 4: Choose the debit account linked to your post office savings account and enter the amount you want to invest.

Step 5: Thoroughly go through the terms and conditions after pressing "Click Here".

Step 6: Submit your request after entering the password.

Step 7: You can download a receipt for the transaction.

Step 8: Sign in and check the ‘Accounts’ section in DOP internet banking to view all the details.

What are the advantages of the national savings certificate?

The benefits of NSC include:
 

• Fixed income: It offers assured returns as the interest rate remains unchanged irrespective of the market conditions.

• Low investment requirement: You can start investing with ₹1000 only, and there is no maximum limit.

• Accessible: You can invest in NSC online and from any post office branch located anywhere in India. Moreover, you can get the NSC certificates transferred between branches.

• Nomination: You can appoint a nominee as the beneficiary to receive the due benefits if you pass away before the tenure ends.

• Loan collateral: NSC certificates are also accepted as collateral while getting loans. A transfer stamp is attached for this purpose.

Tax benefits of NSC investment

Investing in NSC can offer you the following tax* benefits.
 

• Investors can get tax* deductions for investments up to ₹1.5 lakh under the provisions of Section 80C of the Income Tax Act.

• The earned interest that one reinvests for the first 4 years is also eligible for deductions.

• The interest on national saving certificate obtained in the 5th year is taxable as per one’s income tax slab.

How to withdraw NSC investments?

Investors cannot withdraw the invested funds from an NSC before the five-year maturity term ends. No interest is payable if all the funds are withdrawn in the 1st year, and a penalty is levied.
 

However, some exceptions are available under special circumstances, which include:
 

• Death of the investor during the tenure

• Government authorities seize one’s investments.

• When a court issues an order.
   

Here’s what needs to be done if you’re eligible to withdraw the investments:
 

• The NSC certificate must be authenticated, and paperwork for encashment along with identity verification must be done.

• Nominees making withdrawal requests upon death of the investor must provide the Annexure 1 (registered at a post office) and Annexure 2.

Comparing NSC with other tax-saving investments

NSC and other tax-saving instruments differ in the following ways.
 

Conclusion

NSC is a savings scheme providing predetermined returns for a period of 5 years. The scheme is backed by the government, ensuring the investments remain in safe custody. Although you cannot withdraw the funds before the maturity date, certain relaxations are available in death cases and court orders. Moreover, the interest rate is independent of market, economic, or other factors. Tax* benefits on both the invested amount and the interest accrued are available, making it a suitable option for long-term wealth creation.