National Saving Certificates (NSC) – A Complete guide


National Saving Certificates – A Complete guideNational Saving Certificates – A Complete guide

National Saving certificate is issued by Post Offices in India and is a very good small saving scheme. Do you know that investment in NSC can be created in such a way that it provides regular fixed income and can be used as one of the retirement planning options?

In this article we would discuss complete details about National Saving Certificate, how this is used for reducing tax, how the interest income is taxed and how to use this to create regular monthly income.

Features of National Saving Certificate (NSC)

National Saving Certificate is issued by Post offices and is backed up by the Govt. of India.

  • NSC’s are available for 5 and 10 years period
  • NSC’s are available for a minimum investment of Rs 500 and in multiples of Rs 500 / Rs 1,000 / Rs 5,000 / Rs 10,000
  • There is no maximum limit
  • Interest rates are 8.5% p.a. for 5 year NSC (VIII) and 8.8% p.a. for 10 years NSC (IX)
  • Rs 100 invested in 5 year NSC would fetch Rs 151.62 and in 10 year would fetch Rs 234.35
  • Interest is compounded every half year
  • Nomination facility available
  • Individuals, Joint individuals and minor supported by guardian can invest NSC.
  • Societies / Companies cannot invest in NSC. However NRI's can invest in NSC.
  • NSC's can be purchased at post offices by filling up the application form along with ID proof.
  • NSC's are not available online

How NSC’s are useful?

National Saving certificates are purchased mainly for tax saving purpose. Investment up to Rs 1 lakhs can be claimed under 80C for income tax purpose.

NSC’s provide assured returns. Currently the interest rates are 8.5% p.a. for 5 years NSC and 8.8% p.a. for 10 year NSC

Also read: Is Post office term deposit is better than Bank FD?

Liquidity and premature withdrawal

From liquidity point of view, these can be pledged with banks for loan purpose. Premature withdrawal is not permitted.

Taxability

Investment in NSC up to Rs 1 lakh is exempted from income tax under section 80C.


The interest income on NSC is assumed to be re-invested. From taxability point of view, this needs to be added under “Other income” and the same can be claimed as exemption under section 80C. In case, any individual has already exhausted Rs 1 lakh exemption under 80C, it becomes taxable income.

Any interest amount not taxed (accrual basis) every year becomes taxable at maturity. Means the interest income at maturity is NOT tax free.

Maturity

There is no TDS deducted by post office on interest income. It should be declared by individual as taxable income either every year or during maturity.

If NSC’s are not withdrawn, it would be eligible for interest at prevailing post office savings scheme (which is currently 4% p.a.) for a maximum period of 2 years.

You can transfer NSC from one post office to another post office before maturity by submitting an application form.

Also read: All about Small saving schemes / Post office saving schemes

How to buy NSC Online?

There are questions asked by our readers earlier on various comments, saying can we buy NSC Online? Currently Post office is not offering NSC Online. But if this enabled by Post office, it would be really good that one can straight away buy NSC online as this is safe investment.

Creating regular income from NSC’s for retirement

No wonder this investment option can be used for even retirement planning or to get regular fixed amounts.

Invest in NSC (NSC-IX-10 years) every year for 10 years.  After 10 years, you would get regular assured amounts for subsequent 10 years. Since the capital and returns are protected and backed up by Govt. of India, this can be used as a best retirement planning option.

Year of investment Amt invested (Rs) Maturity date Maturity (Rs)
2013 1,00,000 2023 2,34,350
2014 1,00,000 2024 2,34,350
2015 1,00,000 2025 2,34,350
2016 1,00,000 2026 2,34,350
2017 1,00,000 2027 2,34,350
2018 1,00,000 2028 2,34,350
2019 1,00,000 2029 2,34,350
2020 1,00,000 2030 2,34,350
2021 1,00,000 2031 2,34,350
2022 1,00,000 2032 2,34,350

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Suresh
National Saving Certificates


Article by Suresh

Suresh KP i.e. me have written 500+ articles on this blog. I love doing analysis and identifying the Best investment options.

153 Comments

  1. Anubhav Swaroop says:

    Hi , If I need to buy 6 certificates on 6 separate days then will I have to fill the same serial number in each application form or different ?Kindly let me as soon as possible . I do not want to buy through cheque but cash .
    So Person in the post office advised me to buy 6 certificates on 6 separate days.
    thanks with
    regards
    Anubhav

  2. Konda says:

    Hi, I bought the NSC for 5 years in 2010, while in India and i am currently in USA. I have no plans to visit India in next 2 years.

    1. Can you suggest me how to redeem without visiting India?
    2. Is there any way to extend to 10 years?

  3. KVR Suresh Kumar says:

    Sir, I have purchased nsc bonds in Visakhapatnam district. but presently iam working in Rajasthan. can I claim my matured amount at rajasthan post office branches.

  4. Rajiv Singla says:

    Sir I hold a NSC which I had purchased in my home town. But I stay in Mumbai. Can I get the maturity amount in Mumbai. What is the process?

    • Suresh KP says:

      Rajiv, Post offices are operating in their own way. While some post offices are accepting this, others are not. You need to go to your home town to get maturity amount

  5. Aneesh says:

    Hi Vinay, you will get whatever the amount is written on NSC certificate while issuing it to you. Hope this helps!
    \

  6. Avinash Kumar says:

    No , you can not break it. Although if you required money you can take lone againt it but you canot break.

  7. Priyanka says:

    Is there any way by which we can enroll or register policies for National Savings Scheme or Kisaan Vikas Patra in Indian Postal website online which we have already purchased. Also if there is a way what are the steps for doing so ?

  8. sam says:

    This post offices are not yet developed. the systems are not in place. we have to withdraw in a same post office were we purchased this bonds. very very Ridiculous.

  9. ARIF KHAN PATHAN says:

    Sir I patches nsc since 2013 for 75000 $ but suddenly I need some mony their for I want to withdrawal thet nsc . I went to post office & trying to withdraw but they told me its not withdraw befor muturing how it can possible that my money not gave me oh good is that true some way sagged me how I can withdran

  10. neha says:

    sir I want to cancel my nsc of 10 years but i am facing problem that it can’t be break. please solve my problem that how can I break nsc.

    • anvesh says:

      Respected sir

      I have been purchased NSC bond for the financial year 2008 and maturity year 2014… my doubt is in the 2008 i was working at Vizag and purchased at head post office vizag, but now im working at hyderabad… is it possible to claim my matured amout at hyderabad post office or i have to claim at vizag only…

  11. Vinay says:

    If i get a NSC of Rs 10,000 and after 5 Years (Maturity) it’ll be approx Rs: 15,162, My Question here is after 5 years do i get Complete Rs 15162 or will they deduct any tax on 15,162 and will give me the remaining amount,?
    .

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