The National Savings Certificate is termed as Tax Saving Investment Scheme. An Indian Resident can purchase it from any post office. National Savings Certificate is a savings bond that encourages its subscribers, mainly small to mid-income investors to invest while saving on income tax. It can be bought either in the name of minor or with another adult as a joint account. This scheme is backed by the Government hence lowering the risks of investment. No maximum investment limit is set on the purchase of the National Savings Certificate. But only investments up to Rs. 1.5 lakh can earn a tax break under Section 80C of the Income Tax Act. An interest of 8% is offered in the National Savings Certificate scheme.
What is the National Savings Certificate?
National Savings Certificate is a Government Savings Bond which is beneficial for tax saving and small Investment. National Savings Certificate was first introduced in the 1950s to help in the process of nation-building. It is a low-risk Government-backed initiative with a fixed return. Before, there were two fixed maturity periods for National Savings Certificate- five years and ten years. In the latest update in 2019, 10 years National Saving Certificate is discontinued. National Savings Certificate can be considered as the best investment option as it has stood the test of time. The National Savings Certificate account holders can get a certificate of annual accrual of interest from the accounting office.
What is the eligibility to purchase the National Savings Certificate?
The eligibility criteria for investors to purchase the National Savings Certificate are mentioned below:
- The individual must be an Indian citizen.
- There is no prescribed age limit for individuals to purchase a certificate.
- Non-Resident Indians or NRIs cannot invest in NSC.
- Individuals can buy National Savings Certificate on behalf of a minor.
- Under the National Savings Certificate VIII issue, Hindu Undivided Families (HUFs) and Trusts are not eligible to invest in the scheme.
What are the types of accounts that can be opened under the National Savings Certificate Scheme 2019?
A subscriber can deposit a minimum amount of Rs. 1000 and maximum in any sum in multiples of Rs 100. There is no maximum limit for deposit in a National Savings Certificate account. There is no limit to open an NSC Account.
As per the recently notified National Savings Certificates (VIII Issue) Scheme, three types of accounts can be opened:
Single Holder Type Account
The single Holder Type Account can be opened by:
- An adult for himself.
- By an adult on behalf of a minor or a person of unsound mind of whom he/she is the guardian.
- Minor of 10 years can also open this account for self.
Joint A- Type Account
This type of account can be opened jointly in the names of at least three adults payable to all the holders together or the survivor or survivors.
Joint B-Type Account
This type of account can be opened jointly in the name of at least three adults payable to any of the account holders or the survivor or survivors.
How to calculate the maturity amount as per the new National Savings Certificate Scheme, 2019?
- The current interest rates that are offered on National savings Certificate deposits are 7.9%, compounded annually.
- The time for the maturity of deposit is five years from the date of deposit.
- For example, if an individual deposits Rs. 1000 in NSC Account, it will increase to 1462.54 on maturity after five years.
- If you deposit Rs. 10,000 will receive Rs — 14,625 on maturity.
Is premature withdrawal possible in the National Savings Certificate Scheme?
National Savings Certificate VIII has a Lock-in period of 5 years. Premature withdrawal is possible in specified cases:
What are the Tax Benefits Received for making Investment in National Savings Certificate?
- The investment made in the scheme up to the amount of Rs. 1.5 lakh can earn the subscriber a tax rebate under Section 80C.
- The interest that is earned on the certificates is also added back to the initial investment that qualifies for a tax break.
- For instance, purchasing a certificate of worth Rs, 1,000 can provide an individual tax respite on that initial investment amount in the first year. But in the second year, an individual can claim a tax deduction on NSC investments that year as well as the interest earned in the first year. This is because the interest in the amount is added to the original investment and it is compounded annually.
Comparing National Savings Certificate with other Tax Savings Investments
National Savings Certificate is a tax saving investment under section 80C of the Income Tax Act. The other popular options that are available are Equity Linked Savings Schemes(ELSS), National Pension System (NPS), Tax saving Fixed Deposits, Public Provident Fund.
| Investment | Lock-in period | Interest Rate | Risk profile |
| National Savings
Certificate(NSC) |
5 years | 7.9% annually | Low-Risk |
| Equity Linked Savings Schemes(ELSS) | 3 years | 12% to 15% | Market-related risks |
| Public Provident Fund(PPF) | 15 years | 8% | Low-risk |
| National Pension System(NPS) | Till retirement | 8% to 10% | Market-related risks |
| Fixed Deposits(FD) | 5 years | 7% to 9% | Low-risk |
What are the Documents Required?
The following documents must be submitted at any India Post Office to obtain NSC in applicable denominations.
- A Completed NSC Application form.
- Recent photograph.
- Address proof of the subscriber.
- The amount to be invested must be paid in cash or cheque.
How to Transfer of National Savings Certificate?
The National Savings Certificate can be transferred from one post office to another as well as from one individual to another without impacting the interest accrual or maturity of the original certificate.
Following transfer options are available for the investor:
- Form NC-32 – Submit Form NC-32 to transfer the account from one post office to another.
- Form NC-34 – Submit Form NC-34 to transfer certificate from one holder to another.
What are the Benefits of the National Savings Certificate?
The key benefits have been mentioned below:
- It is risk-free.
- These investments offer one of the highest rates of returns amongst all the fixed income instruments.
- It is more flexible because there is a minimum investment limit.
- It can be easily purchased because of its availability in all the Indian Post offices.
- The NSC can also be purchased in the name of a minor.
- The NSC investments can be transferred to another nominated family member in case of an investor’s demise.
Conclusion
The National Savings Certificate (NSC) is a safe small savings instrument that combines tax savings with guaranteed Income Tax returns. This scheme is available in all the post offices. The main objective of investment done in the NSC is to avail tax deduction on deposits and guaranteed returns on investment. Investments made in the National Savings Certificate come under Section 80C of the Income Tax Act, 1961 and Enterslice can help you get optimum Tax benefits from your investment made in this scheme by providing you Income Tax Filing Services.
