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

218 comments

  • Dechen

    My nsc of 5 years is matured month only .. How do I encash it and how long will it take to process ? Please help ..

  • AK Sharma

    What is the procedure to get payment of nscs from p.o.? The nscs were under bank’s lien for raising loan fm bank. The loan cleared and bank has released nscs with letter to p.o. for cancelling the lien and pay the amount due on maturity i.e., 18th of March 2016. I Approached the p.o. with nscs and bank letter. The p.o. has said we willverify. Come after 10, 15 days.
    May I know the procedure please and how much time will p.o. take for releasing payment.!
    Thanks and regards

    Shall be grateful for yr reply.
    A K Sharma
    Oceon@rediffmail. Com

  • Ramesh Chandran

    1] how many days it takes a NSC certificate to be issued from post office.
    2) After issuance of certificate if any emergency can I withdraw it from post office any time during the year

  • JS

    hi,

    my daughter is overseas and the 5years certificate is maturing next month. my question is

    1. ) what are the consequences if we do not withdraw the amount on the date of maturity, but withdraw after 8 months
    2. ) the post office requests for a power of attorney attested if someone on her behalf has to encash the amount, but online there is no mention of the same online except for an authorization letter to be filled by the certificate holder.

    can you please advice

    • Hi JS, Nothing would happen if you withdraw after 8 months. you would get normal SB interest instead of NSC interest after maturity. Alternatively you can give necessary docs to post office and withdraw before your daughter comes back to India

  • Pravee

    Hi,
    I have bought the NSC for 40,000 last year and I have declared in 80c for 2014-2015.
    The interest accumulated in that NSC is also eligible for 80 c tax .
    When I checked with the post office in Pallavaram, Chennai, they told me the interest will be calculated after 5 years only. In that case, how could I declare my interest for the current financial year ? Please advise on this.
    I did not have any details other that the NSc bonds.

    Any help on this is much appreciated.

    Thanks,
    Praveen

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