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    NSC – National Savings Certificate

    • 5 min read
    • Last Modified Date: February 2, 2023
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    The National Savings Certificate, also known as NSC, is an investment product that offers safety and steady returns. The key advantage of this scheme is the tax benefit it offers. The interest earned on NSCs is tax-free while both the principal and the interest are exempt under Section 80C of the Income Tax Act. A minimum amount of Rs 1,000 can be invested in any financial year, with a maximum amount of Rs 1,000,000 being allowed under this scheme. Prematurely encashed certificates will be invalidated, and payments made to certificate holders will be transferable only by postal order.

    Also read Post Office Investments – PPF, NSC, FD, RD, MIS, KVP, SSY.

    What is a National Savings Certificate?

    The NSC is an investment product that offers safety, steady returns, and tax benefits.

    The National Savings Certificate (NSC) is a government-owned savings scheme that enables you to save your money in a bank account while earning interest on it. You can use the interest earned from your investments to pay for daily expenses like food, clothing, and education fees. This ensures that you do not have to worry about whether or not there will be enough money in your pocket at all times because everything will always be covered by this bank account.

    This product also provides certain other benefits, such as tax-free income. The amount of interest that accrues on your investments will never attract any taxes since it comes under Section 80C of the Income Tax Act of 1961.

    This means that whatever amount of interest you earn from your investments will not be taxed under any circumstances. This ensures that you do not have to worry about going through the process of filing your tax returns every year because there will never be any taxable income.

    The interest earned from your investments can also be used to pay for any other expenses like food, clothing, and education fees. You will not have to worry about whether or not there will be enough money in your pocket at all times because everything will always be covered by this account.

    What is the key benefit of this scheme?

    The key advantage of this scheme is that it offers tax-free income. Interest earned on NSCs is exempt under Section 80C of the Income Tax Act, and both the principal and interest can be withdrawn without any penalty or charge. This makes investing in NSCs an excellent mode of investment as they offer safety, steady returns, and good liquidity (you can easily sell your units anytime), among others.

    However, the major drawback of NSCs is that they offer a lower interest rate than other investment instruments. NSCs are considered a safe option because they are backed by the government of India and therefore cannot default on their obligations.

    Is the interest earned tax-free?

    The interest earned on NSC is tax-free, while both the principal and the interest are exempt under Section 80C of the Income Tax Act.

    The investment can be made in multiples of Rs 100, up to a maximum of Rs 1 lakh per financial year. The NSC is a safe and risk-free investment option for people looking to save money for future needs.

    Investing in an NSC is a good option for those who want to save money for the long term and earn tax-free interest on their investment. The interest earned on NSC is exempt from tax and is paid annually.

    The scheme is open for investment from midnight on the 1st day of April every year.

    The scheme is very popular among investors, who like having the safety of their investments guaranteed by the government. It also offers an attractive interest rate of 7.5% per annum and has a volatility of 0%.

    NSCs issued by Indian Post Offices and are available for 5-year and 10-year tenures

    NSCs are issued by India Post offices and are available for 5-year and 10-year tenures. They can be purchased by individuals and HUFs.

    NSCs have a fixed interest rate of 8% p.a., which is payable every six months, commencing from the date they were redeemed or issued.

    You can buy NSCs online, at post offices, and by visiting the website of the National Savings Bank. If you want to purchase them through the website, you will need to open an account first.

    What will happen to prematurely encashed certificates?

    If you have encashed your NSC prematurely and failed to notify the bank by the due date, the bank will invalidate your certificate.

    You may redeem it at any time after its expiration date by paying a penalty of 10 percent of its face value (less any amount already paid).

    If you have not redeemed the NSC after six years from the date of issue, the bank will redeem it for you at face value.

    The bank can also redeem the NSC after six years from the date of issue if it has not been encashed by you. In this case, it will pay you only the amount already paid (if any), and not the penalty.

    Takeaway

    NSCs are a safe and secure investment option. They are tax-free and can be encashed after five or 10 years, depending on the type of certificate you buy.

    If you have premature encashment, it will not be validly issued under any circumstances. The interest rate on these certificates is fixed and not subject to change. You can choose the tenure of your investment, ranging from 10 years to 30 years.

    Conclusion

    The NSC is a product that offers stability and safety, as well as tax benefits. The interest earned on NSC is exempt from tax in India, which makes it a great choice for investors looking for long-term growth.

    Assetmonk is a good investing platform for real estate investments, which is always better than traditional savings schemes.

    NSC - National Savings Certificate FAQs

    The benefits available under Section 80C will be worth Rs. 1.5 lakh. The confusion arises when the limit for 80C just before 2014 is examined. The limit was raised to Rs. 1.5 lakhs in 2015 and will remain subject to change based on government verdicts.

    Yes, a lock-in period equivalent to the maturity time of the certificates exists.

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