NSC – National Savings Certificate

What is NSC?

NSC or National Savings Certificate is a tax saving scheme under Section 80C of the Income Tax Act,1961. The NSC is a fixed income investment scheme. It is used for tax saving purposes. You can open this scheme with any post office near you provided you are an Indian Resident. This Government of India initiative encourages small to mid-income investments. The scheme is low risk and guarantees fixed returns and therefore attracts investors who do not prefer taking risks. The main aim of the scheme is to provide people with the option to open a savings investment that is simple to execute.

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Features of NSC

1. Interest Rate

The interest rate on the National Savings Certificate is subject to change periodically as per the change in policy decisions made by the Finance Ministry. The applicable NSC interest rate as of Q4 FY 2018-19 (January-March 2019) is 8%. The government revises the interest rate every quarter. The interest rate of the last quarter (October-December 2018) was also 8%.

2. Minimum Investment

The scheme allows you to start with a small amount of Rs 100 for your investment. It gives one the ability to increase your investment as and when it is feasible for them.

3. NCS ISSUE VIII

The NCS Issue VII is the only NSC available after the government discontinued the NCS Issue IX Certificate in December 2015. The maturity period of this scheme is 5 years. After the scheme reaches maturity, you will receive the whole maturity value without any TDS deductions. The subscriber to this scheme cannot withdraw prematurely except in cases where the investor dies or the court issues an order for the acceptance of withdrawal.

4. Easy to Transfer

The scheme is easily accessible from any post office in the country. It is also easily transferable from one Post Office to another if necessary without impacting the interest accrual or maturity tenure.

5. Nomination

The scheme allows the investor to nominate a family member which makes it easy to transfer the certificate to the member in the event of the death of the investor.

6. Accepted as Collateral

The subscriber or holder of NSC can also submit the NSC as collateral or security for secured loans. The Post Master has to put a stamp on the certificate and send it to the Bank or NBFC where one wants to secure the loan. Only residents of India can apply for a loan by keeping an NSC as collateral. The interest rate varies according to the individual applying for the loan as well as the bank offering the same.

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Different Types of NSC Holders

• Single Holder Type Certificate: The subscriber to this type of certificate can either purchase it for self or on behalf of a minor.
• Joint A Type Certificate: This type of NSC is held by two investors with an equal share in the maturity value of the scheme. The signature of both holders will be required for the transfer of the certificate of nomination of an individual.
• Joint B Type Certificate: This is also held by two investors but the payment upon maturity of the scheme goes to only one of the holders.

Eligibility

• The investor has to be an Indian Resident to be eligible for applying under this scheme.
• NRIs are not eligible unless they invested under the scheme before becoming an NRI. In this case, they are eligible to hold on to their certificate until the maturity period.
• Trusts and Hindu Undivided Families(HUFs) are not eligible under this scheme.

Some Benefits of NSC

The NSC  is a government scheme and therefore has many benefits.

• it is easily accessible and has one of the highest rates of returns amongst fixed-rate instruments;
• the scheme is almost risk-free.
• it allows one to have tax deduction benefit on investments of up to 1.5 lakh rupees under Section 80C of Income Tax Act.
• the minimum limit of the scheme, i.e Rs 100 encourages the holder of the scheme to be flexible with their investments.
• the annual interest earned from NSC in the first four years is exempt from tax and also eligible as a deduction under Section 80C of Income Tax Act.
• Once the certificate matures, one can opt to re-invest it by purchasing a certificate equal to the maturity value of the old ones.

Procedure and Documents Required To Apply For NSC

The procedure of applying for an NSC is very simple but is not accessible online. Documents required for applying for buying an NSC are as follows:

• The NSC application form or also known as Form 1 where one has to fill out basic information along with with the amount they want to invest and the nominees if any.
• Recent Passport Photograph
• An identity proof which includes Adhaar, Pan Card, Passport, etc
• Address proof which includes Adhaar, Voter ID, Pan Card, etc

After the verification process is over and the documents are submitted, you can make the payment of the said investment amount either through cash/cheque. Once, the payment is processed, the NSCs of the applicable amount can be collected from your post office.

The National Savings Certificate is beneficial for many people, especially in lower or middle-income groups. It gives them an easy avenue of investment as well as an almost guaranteed fixed return from the scheme.