National 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
hi
i bought NSC amoutning Rs 20000 in dec 2008 in trivandrm branch but since then i have transferred to other location and currently i am resisiding in ahmedabad . it is not possible for me to visit trivandrum , now how can i withdraw my money after maturity.
Abhishek, Unfortunate thing is you need to visit home branch of Post office where you have taken NSC to get the maturity.
I have taken NSC in 2010 now I wanted to encash it prematurely is it possible or not please suggest me.
Ajay,Premature withdrawal is not allowed in NSC. In case you need urgent money, you can pledge them any bank and get loan
Sir,
During India, my son used to take NSC certificate of Rs. 10,000/- on his name and his spouse, name. Now that the maturity starts in October, 2013 per month, but my son and DIL are in USA.
The postal authority says that you cannot claim the amount on authority letter given by my son and DIL, as they are in USA.
Is there any solution who to get the money back. FYI my son and DIL are coming to India for short visit of 3 weeks in December 2013.
Regards.
Madhav Kulkarni.
Hi Madhav, As per my knowledge there are no alternative methods. However note that till the time you take the maturity amount up to 2 years, you would get normal bank interest only. Hence you need to take out this money and invest somewhere to get good returns.
I had invested 50000 in NSC in 2008 now it will get matured in 2013. I have using my two different signs but now i am not remembering which signature i had used while filling up NSC form. How I will come to know which signature i had used?
Roshani, You can contact post office and they should be able to help to identify the correct signature. I don’t think there is any other short-cut
Hey Roshini,
Hope you are doing well?, ok coming to the point, my postal agent generally advises me to keep a xerox copy of application or any related documents after dfilling it, so that this can be used as an reference copy and more over, the ambiguity factor is totally gone, as of now you can approach the postal office, but for the coming days i advise you to definitely have a xerox copy for reference.
Regards
deepak
Thanks a lot suresh, for the detailed explanation.
Can i link this scheme to any of my savings accounts, because as your aware that these days we have become so addicted to linking of accounts and it's visibility online. and it would be good enough because we can keep an eye on the linked account.
so please help me with this regard.
Thanks
Deepak
Hi Deepak, Currently NSC is not available online. You need to go to Post office and get them. Even to redeem you need to follow this manual process.
Thanks yaar.