Income Tax laws are not only meant to tax your income but also to encourage you to save or invest money. Therefore, the Income tax Act allows tax benefits on various investment schemes. Under section 80C of the I-T Act, provisions on several tax saving investment options like EPF, PPF, ELSS etc. are mentioned. One such tax saving investment scheme is NSC or National Savings Certificate. This guide will help you understand important things like investment procedure, investment limit and tax benefits, etc.
The National Savings Certificate (NSC) is a postal department’s saving scheme. It is categorised as a ‘highly secured’ among the various class of investments. The NSC is a ‘fixed duration’ saving scheme.
There are three types of NSC:
The investment in NSC qualifies for deduction under section 80C.
NSC comes with a lock-in period of 5 years from the date of purchase. However, the interest is calculated on an annual basis. This interest earned on investment will not be paid to the certificate holder until such time as the investment matures rather it will be reinvested in NSC itself.
As of today (for April to June 2018 quarter) NSC gets 7.6% interest compounded annually.
The following persons can open an NSC account:
**Note: NSC are issued by the post office. You can buy them from any branch of the Indian postal service; any head post office or general post office.
An investor needs to fill up below fields in the NSC application form which has to be procured from the post office:
The post office has to fill in the required details in the application form:
The minimum amount that can be invested is INR 100, and in multiples thereof. There is no upper limit for investment in this scheme. Certificates are issued in the denomination of INR 100, 500, 1,000, 5,000 and 10,000. Signature of the witness is required to complete the procedure.
Along with the filled application, the following documents are required as KYC details to invest in the NSC investment scheme:
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Normally, NSC cannot be redeemed before lock-in period of 5 years. Exceptions are permissible for premature withdrawals. Under this scheme, premature withdrawal is in case of death of the certificate holder, on forfeiture by a pledgee being a Gazetted Government Officer, or when ordered by a court of law.
The documents required for encashment are:
No interest is being paid if amount is withdrawn within 1 year. Also, the penalty is being charged for early withdrawal. Post office pays the maturity amount through the account payee cheque.
|Instrument||Interest Rate (Q1 of 2017-18)||Interest Rate (Q2 & Q3 of 2017-18)||Interest Rate (Q4 of 2017-18)||Interest Rate (Q1 of 2018-19)|
|5 Year National Savings Certificate (NSC)||7.9||7.8||7.6||7.6|
So, as you can see, National Savings Certificate is a risk-free investment scheme which also offers a good return on investment. We hope that this investment guide has given you all the information that you need to invest in this lucrative scheme.
Investments made in an National Savings Certificate come under 80C of the Income Tax Act 1961, and H&R Block India can help you get optimum tax benefits out of your investment in this scheme. You can use any of our Income Tax Filing Services for salaried individuals.