NSC Tax Benefits

If you seek a secure investment option with guaranteed returns, then you should know about the National Savings Certificate (NSC). NSC is a government-backed savings scheme offered in India. NSC offers stability, a competitive interest rate (currently ranging from 6.8% to 7.7%) and a lock-in period of five years. However, the primary advantage of NSC lies in its tax benefits.

The principal amount invested in NSC qualifies for a tax deduction under Section 80C of the Income Tax Act, 1961. The tax deduction helps you to reduce your taxable income by the amount invested. You don't need to pay taxes on the interest earned during the initial four years. Let's take a look at other NSC tax benefits.

Table of Contents:

• ⇾ Features of National Savings Certificate
• ⇾ NSC For Tax Exemption
• ⇾ Tax Deduction under Section 80C
• ⇾ Taxation of Interest
• ⇾ Steps To Open NSC Account
• ⇾ Frequently Asked Questions

Features of National Savings Certificate

The National Savings Certificate is a popular savings scheme for small and mid-income investors. The table presents the primary features of the National Savings Certificate (NSC), a government-backed savings scheme in India.

NSC For Tax Exemption

NSC provides significant tax advantages that make it an attractive choice for many investors, especially those in higher tax brackets. As we know, the National Savings Certificate (NSC) offers attractive tax benefits for Indian residents under Section 80C of the Income Tax Act.

Tax Deduction under Section 80C

• The principal amount you invest in NSC qualifies for a tax deduction under Section 80C of the Income Tax Act.
• The current maximum deduction limit under Section 80C is Rs. 1.5 lakh per financial year. You can reduce your taxable income by up to Rs. 1.5 lakh by investing in NSC (along with other eligible investments under Section 80C).

Taxation of Interest Earned on NSC

The interest earned on NSC is considered "Income from Other Sources" for tax purposes.

• The interest earned on NSC is considered "Income from Other Sources" for tax purposes.
• Only the interest earned in the fifth year is directly credited to your account and is taxable as per your income tax slab.

Check more on National Saving Certificate from the links below:

Compare NSC with other investment options from below:

Steps to Open NSC Account

If you're considering NSCs for your savings plan, you should know the steps to open an account and start investing. Currently, opening an NSC account can only be done at a post office. Here are the steps involved in opening an NSC account at a post office.

• Step 1: Collect the NSC application form. You can get this form either online or directly from any post office branch.
• Step 2: Fill out the form completely. Provide all the required details like your name, address, PAN number, etc.
• Step 3: Submit the form with KYC documents. You'll need self-attested copies of KYC documents like ID proof, address proof, and PAN card.
• Step 4: Make the investment amount payment. You can pay for the NSC investment through cash or cheque. The minimum investment amount for a National Savings Certificate is Rs. 1000.
• Step 5: Once your application is processed, you'll receive a physical NSC certificate from the post office.

Besides NSC Tax Benefits, you can also check and invest in other saving schemes with better returns. Check the table below with links for details: