National Savings Certificate
What is National Savings Certificate?
The National Savings Certificate (NSC) is a fixed-income savings scheme offered by the Government of India. It is a secure investment instrument that allows individuals to save money while earning fixed returns over a specific period.
Why National Savings Certificate?
The NSC is designed to promote savings among individuals and provide them with a safe and reliable investment option. It offers a guaranteed return on investment and helps individuals build a corpus for their future financial needs.
Who can buy National Savings Certificate?
The NSC can be purchased by Indian residents, including individuals, joint individuals, and minors (with guardianship). Non-resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to invest in NSC.
Benefits of National Savings Certificate:
- Guaranteed Returns: The NSC offers a fixed interest rate that is compounded annually. This ensures that the investment grows steadily and provides a predictable return at maturity.
- Tax Benefits: The NSC falls under the Section 80C of the Income Tax Act, 1961. The principal amount invested in NSC qualifies for a deduction of up to Rs. 1.5 lakh from taxable income. Additionally, the interest earned on the NSC is eligible for reinvestment and can be claimed as a deduction under Section 80C.
- Government Backing: The NSC is backed by the Government of India, making it a safe investment option. The principal amount invested and the interest earned are guaranteed by the government.
Rate of returns in National Savings Certificate:
The NSC currently offers an annual interest rate of 6.8% (as of July 2023). The interest is compounded annually and reinvested with the principal amount. The interest rates are subject to periodic revisions by the government.
Where one can buy National Savings Certificate:
The NSC can be purchased from designated post offices across India. These post offices act as authorized agents for the sale of NSCs. Some banks, such as nationalized banks, may also offer NSCs for sale.
Documents required to buy National Savings Certificate:
To purchase the NSC, the following documents are generally required:
- 1. Identity Proof: Aadhaar card, PAN card, passport, voter ID, driving license, etc.
- 2. Address Proof: Aadhaar card, passport, utility bills, ration card, bank statement, etc.
- 3. Passport-sized photographs
- 4. NSC application form
Points to be considered before buying National Savings Certificate:
- Lock-in Period: The NSC has a fixed lock-in period of 5 years. Premature withdrawal is not permitted, except in exceptional circumstances, such as the death of the holder.
- Tax Implications: While the NSC offers tax benefits, the interest earned is taxable under the income from other sources. It is important to consider the tax liability before investing.
- Liquidity: The NSC is a long-term investment with limited liquidity. It may not be suitable for individuals who require access to their funds before the maturity period.
- Interest Rate Risk: The interest rates offered on NSC are subject to change periodically. It is important to consider the prevailing interest rates and their potential impact on your investment returns.