NSC Rules and Guidelines


The National Savings Certificate (NSC) is a government-backed investment scheme offering fixed returns and tax benefits. It is primarily designed for individuals seeking a secure and stable investment option. Given the potential for significant financial returns, understanding the NSC rules and guidelines is crucial.

Investors can maximize their returns, avoid penalties, and ensure the smooth operation of their investments by adhering to these rules. Let's take a look at the NSC rules and guidelines.

What is NSC?

NSC refers to the National Savings Certificate. It's a popular investment option offered by the Government of India through post offices. Essentially, it's a type of savings bond that provides a fixed rate of return over a specific period.

The table below shows the primary features of National Savings Certificate:

Feature Description
Government guarantee Backed by the Indian government, ensuring the safety of investment.
Tax benefits Investments in NSC qualify for tax deductions under Section 80C of the Income Tax Act.
Fixed returns Offers a fixed rate of interest, providing predictable income.
Fixed maturity Typically has a maturity period of 5 years.
Easy accessibility Can be purchased from any post office.

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National Savings Scheme Rules

The National Savings Certificate (NSC) is a safe and secure investment option that provides guaranteed returns and tax benefits. To ensure smooth investment and understanding of the scheme, certain rules and guidelines are in place.

Here is the list of NSC rules and regulations:

  • Eligibility: Individuals can invest in NSC. Trusts and HUFs are not eligible.
  • Nominee: You can appoint a nominee for the certificate.
  • Duplicate Certificate: In case of loss or theft, you can apply for a duplicate certificate.
  • Premature Closure: INot allowed.
  • Interest Rate: The interest rate is fixed by the government and is revised periodically.
  • Tax Deduction at Source (TDS): Not applicable.
  • Loan Against NSC: You can avail a loan against the NSC from banks.

NSC Rules Regarding Eligibility Criteria

Here are the NSC rules and guidelines regarding the eligibility criteria:

  • Indian Citizen: You must be an Indian resident.
  • Age: There is no minimum or maximum age limit for investing in NSC.
  • Entity: Only individuals can invest in NSC. Trusts, HUFs, and companies cannot apply for NSC.
  • Non-Resident Indians (NRIs): NRIs cannot invest in new NSCs. However, if you become an NRI after purchasing an NSC, you can hold it till maturity.
  • Joint Accounts: You can hold an NSC jointly with up to two other adults.

NSC Rules Regarding Documentation

To apply for an National Savings Certificate scheme, you will generally need the following documents:

  • NSC application form
  • Proof of identity (Aadhaar card,PAN card, passport, etc.)
  • Proof of address (Aadhaar card, utility bills, passport, etc.)
  • Recent photograph
  • Cheque or cash for the investment amount
Note: The specific requirements may vary slightly depending on the post office or bank where you apply.

NSC Rules Regarding Premature Withdrawal

Premature withdrawal of an NSC is generally not allowed. The National Savings Certificate scheme generally has a lock-in period of 5 years. However, there are specific exceptions that include:

Circumstances for Premature Withdrawal

  • Death of the holder: In case of the death of the single holder or any of the joint holders, the nominee or legal heir can prematurely withdraw the NSC.
  • Court Order: If a court order mandates the withdrawal, it can be done prematurely.
  • NSC withdrawal if pledged by government officer: Early withdrawal is allowed if a gazetted officer pledges the NSC and it's forfeited.

Interest Implications

  • Withdrawal within one year: If the NSC is prematurely withdrawn within a year of purchase, you will only get back the principal amount invested. No interest is earned.
  • Withdrawal after one year: If the withdrawal happens after one year, you will receive both the principal amount and the accrued interest.
Note: The rules and regulations regarding NSC can change. It's advisable to check with the post office or bank where you invested for the most up-to-date information.

NSC Rules Regarding Tenure

The National Savings Certificate (NSC) has a standard structure with a fixed maturity period, interest rate, and investment options.

  • NSC Issue VIII: This has a tenure of 5 years.
  • NSC Issue IX: This had a tenure of 10 years.
Note: The NSC Issue IX was discontinued in December 2015. Currently, only NSC Issue VIII is available, with a tenure of 5 years.

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NSC Rules Regarding Tax Benefits

The National Savings Certificate (NSC) is one of the investment options that fall under the tax deduction umbrella of Section 80C of the Income Tax Act.

Tax Deduction Under Section 80C

  • The principal amount invested in NSC qualifies for a tax deduction under Section 80C of the Income Tax Act.
  • The maximum deduction allowed under Section 80C is currently Rs. 1.5 lakh in a financial year.

Tax-Deferred Interest

  • The interest earned on the NSC is treated as reinvested for the first four years.
  • This reinvested interest is also eligible for a tax deduction under Section 80C, subject to the overall limit of Rs. 1.5 lakh.
  • Only the interest earned in the fifth year is taxable as income from other sources.

Rules Regarding Loan Against NSC

Loan against an NSC is particularly useful for meeting unexpected expenses like medical emergencies, education fees, or business requirements without disturbing your primary savings or investments.

Here's a list of rules and guidelines regarding loans against National Savings Certificates.

  • Loan Amount: Typically, banks offer loans up to 80-90% of the NSC's face value. The exact amount can vary depending on the bank and the age of the certificate.
  • Tenure: The loan tenure is generally linked to the NSC's maturity period. If the NSC matures in 5 years, the loan tenure will also be 5 years.
  • Interest Rate: The interest rate on the loan is usually higher than the interest earned on the NSC.
  • Eligibility: To be eligible for a loan against NSC, you must be an Indian citizen and the owner of the certificate.
  • Pledge: The NSC will be pledged as collateral for the loan.

NSC Rules Regarding Nominee

A nominee is a person designated by the holder of an NSC to receive the proceeds of the certificate in case of the holder's death. Here are the key rules regarding nominees for NSC:

  • Single Holder: A single holder can nominate one person.
  • Joint Holders: Joint holders can nominate one or more persons.
  • Timing: Nomination can be done at the time of purchasing the NSC or later, before maturity.
  • Form: You need to fill out the prescribed form (Form 1 or Form 2) for nomination.

Nominee Rights

  • The nominee becomes entitled to the NSC and its proceeds upon the death of the holder(s).
  • The nominee can claim the amount by submitting necessary documents like a death certificate, the nominee's identity proof, and the NSC certificate.

Rules and Guidelines

  • Multiple Nominees: For NSCs of Rs. 500 or more, you can nominate multiple persons.
  • No Nomination for Minors: You cannot nominate a minor for an NSC.
  • Change of Nominee: You can change the nominee at any time before maturity by submitting a new nomination form.
  • Legal Heirs: In the absence of a nominee, the legal heirs of the deceased holder will be entitled to the proceeds.

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Frequently Asked Questions

You can open an NSC account either by visiting a post office with the required documents or by using India Post's net banking service.

The tenure or maturity period of National Savings Certificates is 5 years.

Yes, NSC investments are tax deductible. You can claim a deduction of up to Rs. 1.5 lakh per year under Section 80C of the Income Tax Act on the amount invested in NSC.

Yes, joint NSC accounts are permitted. There are two types: Joint A (payable to both holders) and Joint B (payable to either holder).

NSC interest is compounded annually but paid out only at maturity after 5 years.

The minimum investment for NSC is Rs. 1000, while there is no maximum limit.

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