The National Savings Certificate (NSC) is a savings scheme offered by the Government of India, to encourage individuals to invest in a secure and risk-free manner. It is a fixed-income investment instrument available at post offices across the country, aimed primarily at small and medium investors. The investments in NSC qualify for tax deductions under Section 80C of the Income Tax Act, making it an appealing option for tax-saving purposes.
NSCs have a fixed maturity period of five years, and offer attractive interest rates that are compounded annually but paid at maturity.
Table of Contents:
- ⇾ National Savings Certificate Maturity
- ⇾ National Savings Certificate Scheme Details
- ⇾ NSC Premature Withdrawal
- ⇾ National Savings Certificate Maturity Amount
- ⇾ Factors Affecting NSC Maturity Value
- ⇾ Mode of Payment on NSC Maturity
- ⇾ Encashment of NSC Certificate on Maturity
- ⇾ Documents Required for NSC Encashment
- ⇾ NSC Calculator
- ⇾ Calculating NSC Interest & Maturity Amount
- ⇾ Tax Implications on NSC
- ⇾ Frequently Asked Questions
National Savings Certificate Scheme Details
The National Savings Certificate (NSC) interest rate is currently 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.
| Interest rate | 7.70% p.a. |
| Maturity Period | 5 years |
| Minimum Deposit | ₹1000 |
| Maximum Deposit | No limit |
| Tax Benefit | Up to ₹1.5 lakh under section 80C |
Apply for a personal loan at affordable interest rates.
NSC Premature Withdrawal
Generally, NSCs have a lock-in period of five years. However, there are exceptional circumstances under which premature withdrawal is allowed:
- Death of the account holder: In case of the death of a single account holder or any of the joint account holders, the nominee or legal heir can encash the certificate.
- Forfeiture by a pledgee: If the NSC is pledged as collateral for a loan and is forfeited by the lender, it can be considered a premature withdrawal.
- Court order: In cases where a court order mandates the encashment of the NSC, it can be done prematurely.
National Savings Certificate Maturity Amount
The maturity value of your National Savings Certificate (NSC) is the total amount you'll receive when it matures after 5 years. This includes your initial investment (principal amount) plus the interest earned over the entire term.
Factors Affecting NSC Maturity Value
Several factors determine the final maturity value of your NSC:
- Principal Amount: The initial amount you invested in the NSC.
- Interest Rate: The interest rate offered by the government at the time of investment. This rate remains fixed for the entire term.
- Maturity Period: NSCs typically have a 5-year maturity period.
- Compounding: The interest is compounded annually, meaning it's added to the principal each year, earning interest on interest.
Mode of Payment on NSC Maturity
Upon reaching maturity, an investor has the option to either cash out their investment or transfer the amount to a personal savings bank account. If an individual fails to withdraw the amount at maturity, it will continue to accumulate interest at the rate offered for a post office savings account for up to two years. After this period, no further interest will be earned on the amount.
Encashment of NSC Certificate on Maturity
- To encash certificates upon maturity, individuals should visit the post office where they bought and registered their National Savings Certificates.
- Complete the NSC transfer form and submit it to the appropriate authority.
- Alternative post office branches can also be visited, with the requirement of providing additional details about the certificates.
- For certificates purchased for minors, the original buyer must endorse the certificate and have it attested by the minor's legal guardian.
- Investors who bought certificates directly are required to fill out the form and sign the certificate upon receiving the funds.
Documents Required for NSC Encashment
To encash the NSC certificates upon maturity, you must submit the following documents:
- Original National Savings Certificates
- Valid identification proof, such as a government-approved ID like a passport, driver's license, PAN card, etc.
- Completed encashment form
NSC Calculator
While you can calculate the maturity value manually using the compound interest formula, it's often easier and more accurate to use an online NSC calculator. These calculators consider the current interest rate, your investment amount, and the maturity period to give you a precise figure.
| Monthly EMI | ₹86 |
| Principal Amount | ₹1,000 |
| Total Interest | ₹32 |
| Total Amount | ₹1,032.00 |
Calculating NSC Interest & Maturity Amount
To calculate the maturity amount of a National Savings Certificate (NSC), you can use the following formula:
where,
A = final value at the maturity
P = the principal amount invested
R/r = the annual interest rate,
N/n = maturity period/ number of years
Example:
With an investment of Rs 150000 in 5 years with an NSC interest rate of 7.0% p.a.
A = final value at the maturity
p = 150000
R/r = 7.0% p.a. = 0.07
N/n = 5 years
A= 150000(1+ 7.0/100)^5
A= 21,03,828
Total principal invested - Rs 150000
Interest Earned - 6,03,828
At the end of 5 years, your maturity amount would be: 21,03,828
Tax Implications on NSC
While the initial investment in an NSC qualifies for a tax deduction under Section 80C of the Income Tax Act, the interest earned on the NSC is taxable.
Here's a breakdown:
- Initial Investment: The amount you invest in an NSC is eligible for a tax deduction under Section 80C, up to the maximum limit of ₹ 1.5 lakhs per financial year.
- Interest Earned: The interest earned on the NSC is considered income from other sources and is taxable in the year of maturity.
Check more on National Saving Certificate from the links below:
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Frequently Asked Questions
The maturity period for an NSC is 5 years.
The maturity date is printed on the NSC certificate.
On maturity, you receive the principal amount invested along with the accrued interest.
No, you cannot extend the maturity period of an NSC.
The maturity value is calculated based on the principal amount, interest rate, and compounding period (annually).
Typically, you need the NSC certificate, identity proof, and address proof.
Premature withdrawal is generally not allowed, except in specific circumstances like the death of the holder or court order.
You can redeem your NSC at any post office by submitting the required documents.
The interest rate on NSC is fixed at the time of purchase and remains constant throughout the maturity period.
Yes, the interest component of the maturity proceeds is taxable as income.
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