Are you thinking of Investing in National Savings Certificate (NSC)? Many of us get confused due to lack of knowledge of NSC. I have presented here the all details regarding NSC so that you will be able to know, how to purchase NSC and its benefit.
NSC is a risk free, small postal saving scheme of Government of India and it is sell by post offices in India. As the name suggest, the investor receives a NSC certificate for his savings containing the particulars of his investment.
I have answered all important information related to NSC through different questions.
How to Purchase National Savings Certificate?
NSC can be purchased from a post office by applying in Form NC -71 and making Payment in cash/cheque/demand Draft in favor of Postmaster.
NSC can be purchased in denomination of Rs. 100, Rs. 500 , Rs. 1000, Rs. 5000 & Rs. 10,000. Earlier NSC was of two types one is NSC VII ISSUE ( Five Years holding period ) and other is NSC IX ISSUE ( Ten Years holding period). From 20th Dec 2015 onward the sale of NSC IX ISSUE has been discontinued. Now only NSC VII ISSUE are available.
For Example, if you want to purchase these NSC VII ISSUE of Rs. 1 Lac, then you can purchase 10 number of NSC of Rs. 10,000 denominations or 20 number of NSC of Rs. 5000 denominations or any other denominations as per your wish.
You will receive the same rate of interest for five years which was present at the time of purchase of NSC. You can not redeem it before five years except due to some rare reasons like death, liquidation etc.
Presently there is no online facility for purchase of NSC.
Form 1st April 2016 onward the sale of NSC in physical form is discontinued. I have given detailed information on the same at he end of post.
Read:
National Savings Certificate (NSC) online
The Following documents are required for purchase of NSC.
- Copy of Identity Proof
- Copy of Address Proof
- Copy of PAN card
- One passport size Photograph
What is the Current Rate of Interest on NSC?
The rate of interest of NSC is 8.0% p.a compounded half yearly, from 1st October 2016 to 31th Dec 2016.
Read here the notification for change in NSC interest rates. F. NO. 1/04/2016-NS.II
What are the benefits of National Savings Certificate?
- It is risk free investment and being a government scheme, it is more trustful.
- The rate of interest is compounded six monthly which means the interest earned started earning interest after every six months.
- The rate of interest is also high as compare to current fixed deposit rates of various banks.
- The investment and the interest which is re-invested, is eligible for deduction under section 80C of income tax Act, 1961.
- NSC can be purchased anywhere in India from a post office and can be transferred to another post office by Form 32
- Nomination facility is available in NSC. In case of death, the nominee shall be entitled for the maturity amount.
- Loan can be obtained by submitting the NSC certificate as security.
- You can hold the certificate in your name or in joint names.
- The rate of interest does not change, it remain fixed over the life of NSC.
What are the Types of National savings Certificate?
National Savings Certificate are issued in two forms, one is NSC VII Issue and other is NSC IX Issue.
| NSC VII Issue | NSC IX Issue | |
|---|---|---|
| Maturity Period | 5 Years | 10 Years |
| Interest Rates applicable from 01.04.2014 | 8.5% compounded six monthly and payable at 5 years | 8.80% compounded six monthly and payable at 10 Years. |
| Maturity Amount | Rs. 100/- grows to Rs.151.62 after 5 years. | Rs. 100/- grows to Rs. 236.60 after 10 years. |
Unfortunately, the Ministry of Finance has discontinued the sale of NSC IX issue with effect from 20.12.2015.
Read here why government discontinued sale of NSC IX ISSUE ( 10 years holding Period)
What Are the Income Tax Exemptions for NSC?
As per section 80C of Income Tax Act, 1961 investment of Rs. 1,50,000 in NSC is allowed as deduction every year. The investment includes the amount of NSC purchased and the interest reinvested during the year. However, the interest received at the time of maturity (Five Years) is taxable and will be included in the total income under the head ‘Income from Other Sources’. Always remember that last year (5th year) interest is not included in investment since it is not reinvested.
I find out this Youtube Video useful for learning tax on NSC
How To Obtain Loan Against National Savings Certificate?
Various Bank allows Loan against NSC by depositing it as security. You need to submit National Saving Certificate Form NC 41 with Postmaster
How to Obtain Duplicate National Savings Certificate in Case of Loss of NSC?
In case you lose NSC, you need to apply in Form NC 29 to the Postmaster for duplicate certificate. If the postmaster is satisfied that there are genuine reasons to believe that NSC has been actually lost, then he may issue you the duplicate certificate on furnishing of an indemnity bond.
What Are The Disadvantages With NSC?
- You cannot redeem the National Savings Certificate before its maturity period except in some cases like death, forfeiture by pledgee etc.
- You need to save the physical copy of the NSC till its maturity.
NSC Calculator With Example
Find here the NSC Calculator with latest interest rates.
NSC V/S Other Investment Options
You can check the latest interest rates applicable for small savings as notified of Indian Government.
| Investment Options | Rate of Interest ( 01.04.2016 to 30.06.2016) (p.a %) |
| Saving Deposit | 4 |
| 1 year time deposit | 7.1 |
| 2 years time deposit | 7.2 |
| 3 years time deposit | 7.4 |
| 5 years time deposit | 7.9 |
| 5 years recurring deposit | 7.4 |
| 5 year senior Citizen saving Schemes | 8.6 |
| 5 year monthly income Account Scheme | 7.8 |
| 5 year National Saving Certificate | 8.1 |
| Public Provident Fund Scheme | 8.1 |
| Kisan Vikas Patra | 7.8 (Mature in 110 months) |
| Sukanya Samriddhi Account Scheme | 8.6 |
The highest interest rate is 8.6 % which is of 5 year senior citizen saving scheme and Sukanya Samriddhi Account Scheme.
Senior citizen saving scheme belongs to senior citizens only.
Sukanya Samridhhi Account Scheme belongs to persons having girl child.
Otherwise, National Savings Certificate has the best interest rate of 8.1% compounded half yearly.
If you compare NSC with Fixed Deposit you will find that the rate of Fixed Deposit of most of the banks are less than NSC.
National Savings Certificate in online Mode
From 1st July 2016 onward, NSC in Pre-printed form is discontinued. The Physical issue of NSC certificate is discontinued. This step is taken due the reason that now onward Government has started to fix the rate of interest of small savings quarterly. So every quarter the interest may change for NSC and there was chances of errors by re-using the pre-printed NSC in physical form.
Earlier the Government had taken the decision to implement by 1st April 2016, but the Government has given some relaxation till the online system put in place, the post offices are allowed to issue to NSC in physical form. Finally it is implemented by 1st July 2016.
The said decision is taken by Office Memorandum [F.NO.1/04/2016-NS.II], DATED 13-5-2016
Read here how NSC will be available in online mode
Hope you have got the required details of National Saving Certificate. If you have any query, please comment.
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Is NSC better than fixed deposit?
Yes, NSC results in more return as compare to fixed deposit
NSC hard copy is deposit in bank for loan. than how can I receive maturity amount from post office and pay loan of bank.
You can contact the bank officials and get a certified copy.
I have matured NSC certificates from Chennai post office with no CBS now i am in Bangalore. How to encash my certificates without going to chennai?
Nsc is not available at post office, pl. Suggest how I will get the nsc.
Thanks for sharing about national saving certificate to risk free tax saving scheme and here know your pan card details by these link.
But my quesry has not been replied. I have asked for the amount to be taken when I have purchased NSC in February 2015 and February 2016 in ITR for the purpose of income on account of interest and investment under section 80-c.
I will be obliged if I could get this information.
pls tell me after NSC maturity period how much tax will be deducted on my NSC interest ????
Hi
I want to invest 2 lakhs for 5 years in NSC. My doubt is shall I have to pay tax on the interest obtained at the end of 5 years
Sir my nsc of 60000 has completed on 5feb 2018.what will be the amount of interest on the maturity value i. e. 91404 for the period of 5 feb to 20June 2018.
Suppose I invest Rs. 1,00,000/- with interest rate 8% for 5 years.
If we take example of the above attached snapshot, what I understand is that the interest accrued on my investment is Rs. 48,024/- at the time of maturity. So I have to pay tax on Rs 48,024/- and since I fall in 20% taxation slab I need to pay Rs. 9,604/- as income tax. And I need to pay this tax all at a time at the time of my maturity period.
Please confirm whether my understanding is correct.
It would be of great help to me.
Thank you sir.
Regards,
SWETAK RAVAL
Employee of Adani Power (Mundra Ltd.)
9687660586
9725293585