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

If you enjoyed this article, share the link in Facebook/Twitter.

Suresh
National Saving Certificates

218 comments

  • satish

    I have taken NSC bond worth 40k in 2011 January for 5 Years Maturity. Unfortunately i have lost my certificates. Can someone let me know how can i get duplicate certificates.

  • Goutham Babu P

    Sir, My father (who died in July 2016) used to manage my brother’s (he and his family immigrated and are citizens of New Zealand since 2002) finances and he invested some amount (bonafide Indian funds) in NSCs VIII series in 2009. These matured in 2015. Now, when I went to the post office they said in the first instance NRIs cannot invest in NSCs. But, in your website above you said NRIs can invest in NSCs. I checked another website (Taxguru) which said NRIs cannot invest in NSCs. Can you please clarify on this issue. The second issue is my brother’s family holds New Zealand passports and have no other Indian IDs, which the postal authorities said were not recognised as appropriate IDs. Alternatively, they suggested I obtain from my brother Power of Attorney for payment to me, authenticated by Indian High Commission in New Zealand, but they are refusing to do so. In this situation, please advice as to how to go about the issue. No one here is able to guide be properly on the issue. I will be very obliged if you can give me the extant rules in this regard. With regards, Goutham.

  • AMIT PRASAD

    My father had bought NSC worth 20 Lacs, but with post master advice he did for 10 years instead of 5 years. He is retired 3 years back, and this was his retirement money.
    Now he is hospitalized for last 15 days at Apollo Kolkata. We need money very badly as he has no liquid money.
    Post Master is saying he needs court order to liquidate.
    Please guide how to make a Court order.

    Rgds
    Amit Prasad
    9831004090

  • sriram sharma

    hi, i have a SB account in post office in rajasthan……and i took NSC of 10000 INR. Now i am in bangalore and want to buy NSC 10000 INR under same accoint. but post office is telling to open a new account. please advise me the correct process.

  • JAGATHEESAN

    CAN NSC BE PURCHASED ON MY GRANDAUGHTER;S NAME BY ME?

Leave a Reply

Your email address will not be published. Required fields are marked *