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NSC - National Savings Certificate

People save their hard earned money for the purpose of meeting their future needs. But rather than keeping the money idle at home, they opt to keep it invested through various options that are available. There are a variety of options that are available when it comes to secure investments. One can opt for any of them as per their financial goals. The National Savings Certificate is considered to be one such safe option that is available for the general public. As a post office savings service, the national savings certificate is considered to be safe and has a host of benefits attached to it. This article highlights about National Savings Certificate and its varied aspects in detail.

Types of NSC

A National Savings Certificate is defined as a fixed income investment scheme which one can open in any of the post offices across the country. It is a Government of India initiative. The national savings certificate is said to be a savings bond which encourages the subscribers (generally to the small and mid-income scale investors) to invest their money alongside with saving their income tax as well. Individuals might use their NSC for a small and a medium investment and even for the purpose of tax-saving.

Similar to the fixed income instrument such as the Public Provident Fund or the Post Office FDs, the scheme is secure and also a low-risk product. One can opt to buy it from any of the nearby post offices in an individual’s name, for a minor or along with an adult as a joint account holder.

The National Savings Certificate comes with a predefined maturity period of 5 years. In this, there is no maximum limit for the purchase of the NSCs, but the investments of the amount up to a limit of Rs. 1.5 lakhs in the National Savings Certificate can earn a tax break for the investor under Section 80C as per the Income Tax Act, 1961. The certificates earn a fixed interest, which is currently at the rate of 8% per annum from 01.01.2019. They add this interest back to the investment and compound it annually. Many pledge these certificates for taking loans from banks.

NSC Issue VIII

The National Savings Certificate originally had two versions of the certificates. They were the NSC VIII Issue and the NSC IX Issue. The Government had discontinued the NSC IX Issue in December, 2015. Thus currently, only the NSC VIII Issue is available for subscription.

Types of Holding for NSC

Single Holder Type certificate

This certificate is issued to only an individual and it can be held by just one person. He or she can appoint nominees for the NSC, but the individual is the only one who takes the decisions about them.

Joint ‘A’ Type Certificate

This is the one that is issued to two adult holders and it is payable to both of them when the certificates mature. It may be operated by either of the NSC holders or both the holders.

Joint ‘B’ Type Certificate

This NSC is same as the Type A joint certificate. The only way it differs is in the terms of payment of maturity value. The maturity value is paid to only one of the two holders.

Features of National Savings Certificates

The following are some of the popular features and benefits of the National Savings Certificate.

Fixed Rate of Income

Currently, an individual would be able to get a guaranteed return of 8% annual interest from 01.01.2019. They can have the leisure of having a regular and stable source of income.

Types of National Savings Certificate

The National Savings Certificate originally had two versions of the certificates. They were the NSC VIII Issue and the NSC IX Issue. The Government had discontinued the NSC IX Issue in the year December 2015. Thus currently, only the NSC VIII Issue is available for subscription.

A Tax saver

As the National Savings Certificate a government-backed up the tax-saving scheme, one can easily invest in it up to a limit of Rs 1.5 lakhs in order to claim the benefits of section 80C of the Income Tax Act, 1961 for the deductions.

A small start

One can invest as little as Rs. 100 (or in the multiples of Rs. 100) as a start to the investment, and gradually increase the amount whenever feasible.

Fixed Interest rate

Presently, the current rate of interest of the National Savings Certificate is 8% from 01.01.2019. Earlier to this, the rate of interest on the National Savings Certificate was 7.6%. It must be noted that the government revises its interest rate on the National Savings Certificate every quarter.

Fixed Maturity period

Presently, the maturity period which the investor has is for a period of 5 years.

Easy Access

Any individual can purchase the National Savings Certificate scheme from any of the nearby post offices by submitting all of the relevant documents and completing the KYC formalities. It is convenient to transfer the National Savings Certificate from one post office to another also.

Availability of Loan collateral

All the major Banks and the NBFCs accept the National Savings Certificate as a collateral or as a security against the secured loans. In order to do this, the relevant postmaster must put a transfer stamp on the National Savings Certificate and transfer the National Savings Certificate to the custody of the bank.

The Power of compounding

The Interest of the National Savings Certificate gets compounded and is reinvested by default, but the returns may not be able to beat the inflation.

Nomination facilities

An investor can nominate a member of his family (a minor is also allowed) so that they may inherit the same in any unfortunate event of the investor’s sad demise.

Corpus post maturity

At the time of maturity, the individual would receive the full maturity value. As there is no TDS on the National Savings Certificate payouts, the subscriber must pay the proper tax on it by himself.

Early withdrawal

Mostly, one cannot withdraw from the National Savings Certificate early. But still, they accept the same in exceptional cases such as the death of the investor or with a court order.

Eligibility for Investing in NSC

Any individual who is looking out for a safe investment option in order to save money on taxes alongside earning a stable income can opt to use this scheme. The National Savings Certificate offers a guaranteed interest rate and a complete capital protection. But, like most of the fixed income schemes, the National Savings Certificate may not deliver inflation-beating returns such as the tax-saving mutual funds and the National Pension System. Our government has made it conveniently accessible for the prospective investors by letting it be available in the post office.

It is important to clarify that people cannot invest in the National Savings Certificate scheme, while at it. In reality, the Government has promoted the National Savings Certificate like a savings scheme for the individuals. Hence, the Hindu Undivided Families (HUFs) and the trusts cannot invest in the National Savings Certificate. Furthermore, even the non-resident Indians (NRI) cannot purchase any NSC certificates. This scheme is only open to the Indian individual citizen.

Document Required for Purchasing NSC

Valid identity proof as required need to be submitted for the purpose of purchasing an NSC. The document list is as follows-

Identity Proof in Original
Duly Filled NSC application form
Cheque, Cash or Demand Draft in favor of the postmaster from the place where NSC is to be purchased
Signature of witness while purchasing the NSC
Valid identity proof like driving license or voter id
Photographs
Address Proof

How to Buy NSC

The process of purchasing an NSC is convenient and hassle-free. Simply follow the steps below to buy an NSC-

Get the NSC application form and fill it with certain basic information about you and the amount you wish to invest.
Now, you have to submit a supporting document to validate your identity.
Next, you must nominate a beneficiary for the investment.
As the next step, you must make the payment for the amount you wish to invest in NSC. You can make this payment via cash, cheques or a demand draft.
Now, you can collect the certificates from the post office. It is vital to note that if the payment has been made via cheque, then the certificate is issued upon realization of the payment made. In any other case, the certificate must be issued immediately.
Please note that you must check the certificate for any mathematical or clerical errors. In case there is any mistake, kindly get it corrected immediately.

Nominating a Beneficiary for NSC

An investor can nominate a member of his family (a minor is also allowed) so that they may inherit the same in any unfortunate event of the investor’s sad demise. While this is not mandatory, it is wise to always have a nominee who can avail the benefits of your investment. The nominations can be made through Form 1 or Form 2. However, if there is a need to change the nomination, then you must use Form 3.

It is important to note that in case the NSC holder passes away without appointing a nominee, then the amount of the certificate will be paid to the legal heirs of the holder.

Maturity Period of NSC

Presently, the maturity period which the investor has, is of a period of 5 years. At the end of this tenure, the investor receives the full maturity amount, along with the interest accrued. It is important to note that only the interest earned in the final year of the maturity certificate period is taxable.

Loan Against National Savings Certificates

All major Banks and the NBFCs accept the National Savings Certificate as a collateral or as a security against the secured loans. In order to do this, the relevant postmaster must put a transfer stamp on the National Savings Certificate and transfer the National Savings Certificate to the custody of the bank.

Transferring NSC

Transfer of NSC is possible and it primarily has two types. You can either transfer the certificate(s) from one post office to another or you can transfer the ownership of the NSC from one person to another. To transfer the certificate from one post office to the other, as an NSC holder, you will have to submit an application to the previous or the next post office with a request of transfer. The holders of the certificate need to sign this application if they are of Joint A or Joint B type.

In case you wish to transfer the NSC from one person to another, then there needs to be a written consent from the postmaster of the place of issue of the NSC certificate. Also, this can be done if the original certificate holder has died or from the original holder to another person, as directed by a court of law.

Duplicate NSC Certificates

In case your NSC certificate is lost or damaged, there is an option of issuing a duplicate NSC certificate. To do this, you must apply at the post office where the certificate was issued. You can also make an application at any post office and they shall forward your request to the appropriate one. In this process, ensure that you mention details like the number of your certificate, amounts of purchase and the date on which they were purchased. You must also mention the reason of issuing new certificate, without fail. Then, a duplicate certificate will be issued and you can redeem it only at the post office where it was issued.

FAQs on National Savings Certificate

Is there a denomination smaller than Rs. 100?

No, there is no denomination less then Rs.100.

Is the tax benefit for NSC under Section 80C upto Rs. 1.5 lakh?

Yes, there is a tax benefit of upto Rs. 1.5 lakhs under Section 80C for NSC.

Can a nomination be canceled or changed?

Yes, your nomination can be canceled or changed.

What is the maturity period and interest rate for NSC Issue VIII?

Presently, the maturity period for an NSC Issue VIII is of 5 years.

What is the current rate of Interest of NSC?

Currently, the rate of interest of the National Savings Certificate is 8% effective from 01.01.2019. Earlier to this, the rate of interest on the National Savings Certificate was 7.6%. It must be noted that the government revises its interest rate on the National Savings Certificate every quarter.

What is the maturity period and interest rate for NSC Issue IX?

NSC Issue IX have been discontinued and hence, there is no information available on maturity period or interest applicable on this scheme.

What is the minimum limit for investing in NSC?

The minimum limit for investing in NSC is Rs. 100.

Will tax on NSC Interest earned be deducted at source?

No, the tax on NSC Interest earned will not be deducted at source.

Which part of the IT Act does NSC come under?

NSC comes under Section 80C, of the Income Tax Act, 1961.

Can I take a loan based on my NSC investments?

Can a trust or an HUF invest in NSC?

No, a trust or an HUF cannot invest in NSC.

Who can take a single holder type certificate?