Senior Citizen Savings Scheme Details (SCSS)
January 24, 2018
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January 25, 2018

National Savings Certificate (NSC)

Last Update Date : August 11, 2018

NSC Certificate Interest Rate

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.

What is NSC?

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:

  • Single holder type certificate
  • Joint A type certificate (2 adults wherein amount is paid to both the holders)
  • Joint B type certificate(2 adults wherein amount is paid to either of the holders)

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.

Who is eligible to invest in NSC?

The following persons can open an NSC account:

  • Any Indian resident can invest in this scheme
  • Non-residents are not eligible to invest in NSC
  • You can invest jointly with another adult or purchase it on behalf of a minor
  • However, under Issue VIII of NSC, Trusts and Hindu Unified Families are also not eligible to invest in NSC
  • Nomination facility is also available under NSC scheme

**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.

How to Purchase NSC?

An investor needs to fill up below fields in the NSC application form which has to be procured from the post office:

  • Name of the Account holder
  • Mode of payment (Cash / Cheque details)
  • Type of account
  • Name of the guardian( if applicable)
  • Name of the nominee, full address and minor nominee’s date of birth
  • Signature of the investor
  • Signature of the authorised agent

The post office has to fill in the required details in the application form:

  • Number of certificates and denominations
  • Issue price
  • Date of encashment
  • Postmaster’s initials
  • Signature of the postmaster

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.

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Documents required for investment in NSC

Along with the filled application, the following documents are required as KYC details to invest in the NSC investment scheme:

  • Original identity proof for verification
    • Passport
    • PAN card
    • Voter ID card
    • Driving licence
    • Government ID card
    • Senior citizen ID card
  • Address Proof
    • Passport
    • Telephone bill
    • Electricity bill
    • Bank Statement with Cheque
    • Certificate/ ID card issued by Post office
  • Photograph

Financial Advantages of Investing in National Savings Certificate

  • The main aim of investing in the NSC is to avail tax benefit on deposits and guaranteed returns on investment. It is preferred by many to generate a regular monthly income flow in retirement.
  • The interest can be practically tax-free except for the interest that is earned in the last year.
  • The investment can be used to secure loans. National Savings Certificate can be kept as collateral security to get the loan from banks & financial institutions.
  • You can arrange for duplicate certificates in case the original certificates are lost or damaged
  • The interest earned is compounded and reinvested in the scheme by default which means that without purchasing extra certificates, you can increase the invested amount.
  • Reinvestment option is also available at the end of the maturity period of NSC.
  • In case of NSC VIII and IX issue, it can be transferred from one person to another by filing up required forms; but, it can be done only once during the lock-in period.

NSC Tax Benefits

  • An investor can get tax benefits up to the maximum limit of INR 1,50,000 per annum.
  • Also, the interest accrued on investments (each year) is also considered as a fresh investment for tax deduction under section 80C.
  • There is no TDS on National Saving Certificate. However, the interest earned is taxed according to marginal income tax rates applicable to the taxpayer.

[ Try our: Income Tax Calculator ]

NSC Maturity Period & Premature Withdrawal

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:

  • Original National Savings Certificate
  • NSC encashment form
  • Identity proof
  • In case the certificate is purchased on behalf of a minor, attestation by a guardian is mandatory.
  • In case of death of an account holder, the nominee can opt for encashment by submitting two forms of claim settlement application
    Annexure 1: (registered at a post office)
    Annexure 2: (legal evidence)

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.

NSC Interest Rates Applicable from 2017 to 2018:

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.

How H&R Block can help you?

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.

  • HIRE AN EXPERT TO E-FILE YOUR RETURN

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