National Savings Certificate

The primary aim of this scheme is to inspire each individual of our country into small and medium savings, and this has also been encouraged by providing tax benefits for these savings. The risks of investing in such a scheme are also extremely low since they are directly encouraged by the Govt.

· 3 min read
National Savings Certificate

The National Savings Certificate is a popular government-promoted low-risk fixed-income scheme. This scheme is available from all the NSC post offices. As there a vast number of post offices present in our country with easy access, it is a scheme that is accessible for a wide part of the population.

The primary aim of this scheme is to inspire each individual of our country into small and medium savings, and this has also been encouraged by providing tax benefits for these savings. The risks of investing in such a scheme are also extremely low since they are directly encouraged by the Government of India.

As the National Savings Certificate scheme was primarily launched for the saving activities of individuals, only Indian citizens are allowed to invest in this scheme. Non-resident Indians (NRIs) and Hindu Undivided Families (HUF) will not be eligible for this scheme.

What are the features of the National Savings Certificate?

The features of the scheme are:-

  • Minimum capital requirement: The absolute minimum amount required to invest in the certificate scheme is ₹100. Certificates of the denominations ₹100, ₹500, ₹1000, ₹5000, and ₹10000 can be purchased from the NSC post offices, starting off with smaller investments and gradual increase as per the convenience of the individual.
  • Tenure till maturity: Individuals can choose a maturity period of either 5 years or 10 years.
  • Rate of interest: At the moment, the interest rate of the certificate scheme is at 6.8%, reduced from 7.9%. This rate is compounded on an annual basis and you shall receive the interest amount payable at the end of the maturity period. If say you bought a certificate worth ₹10000, you will receive an interest amount of ₹9306.90 after a maturity period of 10 years, along with your initial investment of ₹10000.
  • Nominations: You can also add your family members as nominees while registering for the certificate scheme. This means that if you meet an unfortunate early death, the nominees will be permitted to inherit the interest amount from the scheme. You can also include minors as nominees in this scheme.

What are the advantages of participating in this scheme?

The advantages of participating in the National Savings Certificate schemes are as follows:-

  • You are liable to avail of tax benefits on the returns that you have made from this investment. The interest generated on the capital is tax-free except for the final year.
  • The risks of investments are extremely low as they are backed by the Government of India and therefore the returns are guaranteed under this scheme. As a result, many individuals prefer this scheme as a source of regular income.
  • The post offices will help you obtain a duplicate certificate in case you lost the original one.
  • Unlike few other sources of government back saving schemes, you can continue investing in this scheme even post the maturity period.
  • You are allowed to transfer the certificate to another individual for any reason whatsoever (only once in the lock-in period though).

Documents required for purchasing a National Savings Certificate

  • You are required to submit the official National Savings Certificate application form.
  • You must submit an original ID proof like your Aadhaar Card, PAN Card, Driving License, Voter ID, Passport, etc.
  • You must submit a passport size photograph of yourself.
  • You must submit an address proof along with your ID proof. If your ID proof acts as an address proof then that works as well. You can submit your Passport, electricity bill, bank statement, or telephone bill with a cheque and a certificate issued by the Post Office.

What are the tax benefits provided by the National Savings Certificate?

As we have mentioned earlier, the National Savings Certificate provides plenty of tax benefits, of which some of them are:-

  • You can avail of tax benefits up to ₹1.5 lakh under Section 80C of the Income Tax Act, 1961.
  • The yearly interest generated from the National Savings Certificate can be considered ‘new investment’ for further tax benefits.
  • TDS, i.e. Tax Deducted at Source isn’t applicable under this scheme.

Is Premature Withdrawal permitted under this scheme?

The capital that you have set aside for buying these certificates are not allowed to be withdrawn before the maturity period unless there are certain circumstances, which are:-

  • If the holder of the certificate meets an unfortunate death.
  • If the holder of the certificate forfeits the certificate with the pledgee being a Gazetted Government Officer.
  • By order of the court of law.

To complete the premature withdrawal of the certificate, there are a few documents that must be submitted by the holder. These documents include:-

  • The original National Savings Certificate
  • The National Savings Certificate encashment form
  • ID proof like Aadhaar Card, PAN Card, Voter ID, etc
  • The attestation of the guardian in case the purchase was on behalf of a minor.
  • Submit Annexure 1 and Annexure 2 forms in case the original holder meets an unfortunate death. You must submit Annexure 1 form at a registered post office while Annexure 2 form must be submitted as legal evidence.

If you have withdrawn this amount within a year, you will not be required to pay any interest. However, there will be a penalty amount charged in the scenario of early withdrawals. You shall be paid this maturity amount by cheque via the post office.

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