There are a lot of options available to the investors when it comes to savings.
These saving options come with a number of attractive features, namely tax benefits, attractive interest rates, safety, etc.
These investment products are designed to satisfy various needs of investors, which include some of the features mentioned above.
Some of the most common fixed income securities include National Savings Certificate (NSC), Public Provident Fund (PPF), and Kisan Vikas Patrika.
However, today in this article we’ll talk only about National Savings Scheme (NSC).
The inception of the National Savings Certificates (NSC) dates back to 1950’s when it was issued by the government to collect funds for nation-building.
National Savings Certificate (NSC)
National Savings Certificate, more commonly known as NSC is a savings bond issued by the Indian government for small savings and for income tax savings in India.
These certificates are issued by post- office, which can be taken from any branch of Indian postal office.
It can be issued for a period of 5 years and 10 years and can also be kept as collateral with the banks for availing loans.
It is launched by the Indian government in order to promote the savings habit among the Indian masses and to channelize these funds in the right path for the growth of the country.
The government in order to encourage more investment under this scheme, has allowed to claim as a tax deduction under 80 C.
The interest rate in 5 years, NSC is at par with that of other Fixed Income instruments like PPF, which stands at 7.60%.
The interest on NSC is declared by the government each year before 1st April and it is compounded yearly w.e.f. 1st April 2016.
How much to invest in NSC?
The minimum investment to be made in NSC is Rs 100 and there’s no maximum limit on the invested amount.
But the maximum tax deduction, you can claim under 80C stands at Rs 1,50,000.
It is issued in various denominations of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000 and an individual can buy any number of certificates of any denomination.
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However, an NRI is not allowed to invest in NSC.
Key features
Some of the main features of National Savings Certificate are stated below-
1. No premature evaluation
You cannot withdraw the investments prematurely unless it is the case of death of the holder.
2. Various denominations
The certificate is available in various denominations including Rs 100, Rs 500, Rs 1000, Rs 5000 and Rs 10,000.
3. Minimum denomination
You can start your investment in NSC with a minimum of Rs 100.
4. No maximum limit
There’s no limit on the amount to be invested in NSC
5. Only for individuals
It’s only meant for individuals and the entities like trusts, HUF, companies cannot invest in it.
Benefits
An individual can avail the following benefits by investing in NSC-]
1. The certificates can be used as a collateral to avail loan from banks.
2. You can claim deduction up to Rs 1,50,000 under 80C of the income tax act.
3. The certificates can be bought on behalf of the minors.
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4. The interest earned on National Savings Certificate gets compounded and is reinvested, which implies an increase in the invested amount without buying any extra certificates.
Documents required
The documents needed to purchase National Savings Certificates are stated below-
1. Application form
The form is known as Form 1 and it allows you to declare nominee and the amount to be invested.
2. Identity and address proof
You can show your documents like Aadhar card, Voter ID card, Passport, Driving license etc.
Premature evaluation
National Savings Certificate comes with a lock-in period and cannot be withdrawn before the maturity date subject to the following conditions:
1. On the death of the holder or holders (in case of joint holders)
2. The holder of the certificates forfeits the certificate through a pledge.
3. By a court of law, order to be paid prematurely.
However, the conditions stated on the amount which you will get by closing NSC prematurely are stated below-
1. If the certificate is withdrawn within a year of its issue, then you will receive only the invested amount, without any interest.
2. If the NSC is withdrawn between 1-3 year, then the interest paid will be only simple interest.
Nomination facility
The subscriber of the National Savings Certificates (NSC) can choose any individual as a nominee at the time of buying the certificate in Form 1 or before NSC matures in Form 2.
In case of the death of the holder, the nominee becomes entitled to receive the investment proceeds.
In case of death of the holder, the nominee shall be entitled to-
1. Encash
2. Divide the amount in the proper denominations in favor of individual nominees.
However, the right of the nominee comes into play only in case of death of the original holder.
Conclusion
National Savings Certificates (NSC) is
You have an option to hold it jointly or you can hold it singly and nominate someone, which is not possible in other savings product like PPF.
Another Reading: Things about PPF Scheme
However, you should conduct your own research and compare it with other savings instrument to take a better decision.
Keep learning!!
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