The National Savings Certificate or NSC is a fixed income scheme that can be opened with any post office branch. This scheme is an initiative of the Government of India. It is a type of savings bond that encourages subscribers-mainly small to medium income investors to invest while saving on income tax.
Just like other fixed-income instruments for example Public Provident Fund and Post Office FDs, this scheme is also a low-risk fixed-income product. You can acquire it from the nearest post office under your name, a minor or with another adult as a joint account. The NSC comes with a maturity period of 5 years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs 1.5 lakh can earn you a tax break under Section 80C of the Income Tax Act.
The NSC earns a fixed rate of interest which is currently at a rate of 6.8% per annum.
Eligibility criteria for NSC
The investors of NSC have to fulfil the following eligibility criteria:
- The applicant should be a citizen of India
- There is no age limit for individuals who are looking to invest in National Savings Certificate
- Individuals that are not residents of India cannot purchase NSC
- Trusts and HUFs are not eligible to invest in the scheme under the NSC VIII Issue
- Investments can be made with another adult or individuals can purchase NSC on the behalf of a minor
Features of NSC
Some of the salient features of the National Savings Certificate are as follows:
- Minimum savings
The minimum amount that the National Savings Certificate can be purchased for is Rs 100. Other denominations for which the certificate can be purchased are Rs 10,000, Rs 5,000, Rs 1,000, Rs 500, and Rs 100.
- Maturity tenure
Five years to ten years are the two maturity periods of the NSC that investors can choose from
Members of the family including minors can be nominated as nominees by the investor. If the investor passes away during the tenure of the scheme, the nominee will be transferred to the nominee.
- Rate of interest
Currently, the interest rate has been reduced from 7.9% to 6.8% and is compounded on an annual basis. However, the interest is payable only at maturity
Advantages of NSC
The list of benefits to the investors investing in the National Savings Certificate is given below:
- The tax benefits that the individuals can avail themselves of is one of the main advantages of investing in the NSC. The returns are guaranteed under this scheme. A lot of individuals prefer this scheme as it offers regular income once they retire
- Apart from the interest that is earned in the final year, the remaining interest that is generated is exempted from tax
- If individuals lose the original certificate, they can obtain a duplicate certificate easily
- Individuals have an option to continue investing in the scheme, even after the maturity period
- Transfer of certificate is allowed from one individual to another. However, it is only allowed once during the lock-in period