National Saving Certificate

The National Savings Certificates (NSCs) are a popular long-term investment scheme offered by the Government of India through post offices and authorized banks. They offer a fixed interest rate, guaranteed by the government, and are considered a safe and reliable investment option. NSCs typically have a defined maturity period of 5 years, making them suitable for long-term financial planning.

National Savings Certificate is a versatile and reliable investment choice, offering safety, tax benefits, and steady returns for investors seeking stability in their financial portfolios.

NSC Interest Rate

The National Savings Certificate (NSC) interest rate is currently set at an attractive 7.7% per annum. This rate is compounded annually and payable at maturity. The NSC interest rate is revised quarterly by the Government of India.

NSC Eligibility

You can invest in the National Savings Scheme only if you meet the following NSC eligibility criteria. Refer to the table below to get a clear understanding of the eligibility requirements.

• Must be an Indian resident.
• Adult individuals or a group of up to 3 adults may invest jointly.
• Guardians can invest on behalf of a minor or a person of unsound mind.
• Minor above the age of 10 can invest.

What can make you non-eligible for investing in NSC?

• NRIs or non-resident Indians cannot invest in NSC.
• Trusts and Hindu Undivided Families (HUFs) are not eligible for NSC.
• Only the Karta of the Hindu Undivided Families are eligible to invest.

Documents Required For NSC

To invest in NSC, individuals need to provide documents such as proof of identity, proof of address, and the filled-out application form. These documents ensure a smooth and secure investment process. Keep the following documents ready to ensure a smooth investment process:

• Duly filled NSC application form
• Valid identity proof such as Aadhaar Card, Driver’s License, PAN, etc.
• Valid address proof such as utility bill, Passport, Aadhar Card, etc.
• Recent passport-size photograph.
• Investment amount in cash or cheque.

How To Invest in NSC

You can invest in NSC using either the offline or online process. Given below is the detailed process of investing in NSC.

Investing in National Savings Certificates (NSCs) Offline:

• Visit your nearest post office: Visit the post office customer service counter and obtain the NSC application form (Form-1).
• Fill out the NSC application form: Carefully fill out the form with accurate details about yourself, the amount you wish to invest, and any nominated beneficiary.
• Submit KYC documents: Provide self-attested copies of your identity proof (Aadhaar card, PAN card, voter ID, driving license, or passport) and address proof (recent electricity bill, rental agreement, or bank statement). Carry the original documents for verification purposes.
• Make the investment: Choose the mode of payment you prefer, either cash or cheque. Deposit the investment amount into the designated account as per the instructions provided by the post office staff.
• Receive the NSC certificate: Receive the physical NSC certificate as proof of your investment. Keep this certificate safe as it will be required for claiming the maturity amount or premature withdrawal.

Investing in National Savings Certificates (NSCs) Online:

• Account: To invest in NSC online, you must have an active savings account with a bank or post office that offers NSC e-transactions.
• Internet banking access: Ensure you have access to Internet banking for your savings account.
• Initiate the process: Log in to your Internet banking portal and navigate to the section dedicated to investment or tax-saving schemes.
• Select NSC option: Locate the option to open an NSC account or purchase NSCs.
• Provide details: Enter the required details, including your savings account number, investment amount, and any nominated beneficiary.
• Confirm and proceed: Review the details carefully and confirm the transaction. The investment amount will be debited from your savings account, and the NSC certificate will be linked to your account electronically.
• View NSC details: You can view the details of your NSC investment, including maturity date and interest earned, through your Internet banking portal.

Modes & Types of NSC

You can invest in NSC through various modes based on your preference. The three modes of NSC are:

• Single Holder Type Certificate: In this mode, a National Savings Certificate (NSC) is issued in the name of a single individual. The holder has sole ownership, and any accrued interest is taxable in their name.
• Joint ‘A’ Type Certificate: This NSC is jointly issued to two individuals, with the interest income attributed to the first holder. It is a suitable option for individuals who wish to jointly invest and enjoy the advantages of collaborative ownership.
• Joint ‘B’ Type Certificate: Issued jointly to two individuals, the interest income in this type is shared equally between the joint holders. It provides an equal distribution of benefits for both individuals involved in the investment.

Types of National Savings Certificates (NSCs)

Previously, there were two types of NSCs available:

• NSC VIII Issue (5-Year Tenure): This type of NSC had a fixed tenure of 5 years and offered a variable interest rate set by the Government of India.
• NSC IX Issue (10-Year Tenure): This type of NSC had a fixed tenure of 10 years and offered a fixed interest rate at the time of issuance.

However, the NSC IX Issue was discontinued in December 2015. Currently, only the NSC VIII Issue with a 5-year tenure is available for investment.

Features & Benefits of National Saving Certificate

The National Savings Certificate holds many benefits for the investor. The primary features and benefits of NSC are as follows:

• Assured Returns: The National Savings Certificate (NSC) presently guarantees a return of 7.7%, outperforming conventional Fixed Deposits (FDs).
• Varieties: Originally featuring the NSC VIII Issue and NSC IX Issue, only the NSC VIII Issue is currently open for subscription after the discontinuation of the NSC IX Issue in December 2015.
• Tax Efficiency: As a government-backed tax-saving scheme, NSC allows investors to claim deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961.
• Interest Dynamics: The current interest rate stands at 7.7% p.a. for Q1 FY 2023-24, subject to quarterly revisions by the government. This interest is compounded annually and paid out at maturity.
• Loan Security: NSC serves as collateral for secured loans from banks and NBFCs. The postmaster's involvement is pivotal, marked by placing a transfer stamp on the certificate.
• Compounding Magic: The interest automatically compounds and reinvests, although the returns may not necessarily outpace inflation.
• Nomination Privilege: Investors can nominate a family member, even a minor, ensuring a seamless inheritance plan in case of the investor's demise.
• Post-Maturity Payout: Upon maturity, the entire maturity value is disbursed. Given the absence of TDS on NSC payouts, the onus of applicable taxes lies with the subscriber.
• Withdrawal Exceptions: While early withdrawal is generally restricted, exceptions are made for extraordinary circumstances such as the demise of the investor or under a court order.

NSC Tax Benefit

The National Savings Certificate opens up opportunities to save up income tax. However, there are certain intricacies of the system of taxabilty in the case of NSC.

• National Savings Certificate (NSC) is a tax-saving investment under Section 80C, allowing a deduction of the principal amount invested up to Rs. 1.5 lakh.
• The annual interest accrued during the initial four years is considered reinvested and is therefore exempt from tax. This interest amount qualifies for an additional deduction under Section 80C, subject to the overall annual limit of Rs. 1.5 lakh.
• The interest accrued in the fifth year is not reinvested and is thus subject to taxation based on the investor's applicable slab rate.

Transfer of National Saving Certificate

To move your NSC account from one Post Office branch to another, you should fill out an application at either the old or the new branch. If your account is of Joint A or B type, ensure that all account holders sign the application.

Loan Against NSC Certificate

A Loan Against a National Savings Certificate (NSC) involves pledging the NSC as collateral to secure a loan. NSC holders can approach financial institutions, providing their certificates to access funds.

The loan amount is determined based on the NSC's face value, with competitive interest rates and a tenure typically linked to the certificate's remaining maturity period. While the NSC continues to accrue interest during the loan period, it serves as security until the borrower repays the principal and interest. It's crucial for borrowers to understand the terms, repayment obligations, and potential impact on the NSC to make informed financial decisions.

Premature Withdrawal

One of the key features of the NSC is its lock-in period of 5 years. This means that you cannot withdraw your money from the NSC before it matures.

There are a few exceptions to this rule, where you can withdraw your money prematurely. These are:

• Death of the account holder: In case of the death of the account holder, the NSC can be prematurely withdrawn by the nominee or legal heirs.
• Court order: If a court orders the premature withdrawal of the NSC, the post office will honor the order.
• Forfeiture by a pledgee being a Gazetted officer: If a Gazetted officer has pledged the NSC and defaults on the loan, the pledgee can forfeit the NSC and withdraw the money prematurely.

Issue of Duplicate NSC Certificates

The issuance of duplicate National Savings Certificate (NSC) certificates is a process designed to replace lost, stolen, or damaged certificates. Here are the general steps involved:

• Death of the account holder: Lodge a Complaint: Report the loss or theft of the NSC certificate to the nearest police station and obtain a copy of the FIR (First Information Report).
• Court order: Affidavit: Prepare an affidavit stating the circumstances of the loss or theft. Include details such as the certificate number, date of issue, and any relevant information.
• Forfeiture by a pledgee being a Gazetted officer: Application Form: Obtain the prescribed application form for the issue of a duplicate NSC certificate from the post office where the original certificate was issued.
• Forfeiture by a pledgee being a Gazetted officer: Attach Documents: Attach the FIR copy, affidavit, and any other documents required by the post office, such as a copy of the lost certificate or a bond of indemnity.
• Forfeiture by a pledgee being a Gazetted officer: Identity Verification: Provide proof of identity to verify that the applicant is the rightful owner of the NSC.
• Forfeiture by a pledgee being a Gazetted officer: Payment of Fees: Pay the requisite fees for issuing a duplicate certificate. The fee amount may vary and is determined by the issuing authority.
• Forfeiture by a pledgee being a Gazetted officer: Processing Time: The process of issuing a duplicate NSC certificate may take some time. The applicant will be informed when the duplicate certificate is ready for collection.

It's crucial to note that the specific requirements and procedures for obtaining a duplicate NSC certificate may vary by country and issuing authority. Therefore, individuals should contact the relevant post office or financial institution for accurate and detailed information based on their jurisdiction.

NSC vs other Tax-Saving Schemes

When analyzing investment opportunities, it is crucial to assess National Savings Certificates (NSC) in comparison to other available choices. This comparative evaluation helps you choose investments that match your financial goal.