National Savings Certificate (NSC) is an assured investment instrument which provides double benefit to the certificate holder. It gives not only adequate returns with high safety but also helps in minimising your tax implications. NSCs are an instrument for facilitating long-term savings.
NSCs can be purchased at any authorized post offices and all head post offices across the country. It is available in denominations of Rs. 100, Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. Minimum amount of investment can be of Rs. 100 and there is no maximum limit for the same. This can be issued to an individual in his personal capacity, on behalf of minor or trust or issued as a joint holder. It also facilitates the nomination facility. Certificates can be transferred from one post office to any other post office and can be transfer from one person to another person with certain conditions.
NSC offers 8% interest compounded half-yearly. When NSC is brought for a particular value, the interest compounded every year is reinvested and returned along with the principal amount only after the maturity. The duration for an NSC is 6 years. Due the compounding, the effective rate per annum works out to 8.16% in 1st year, 8.33% in 2nd, 9.55% in 3rd, 10.33% in 4th, 11.17% in next year and 12.08 in the last year.
The NSC can be encashed at any registered or authorized post office. The authority needs to be satisfied with the identity of the person presenting the certificate. Generally pre-mature encashment is not allowed but in cases like death of the holder, forfeiture by the nominee or courts order, it can be encashed prematurely.
Tax Benefits-
Deduction shall be allowed to Individual or HUF for making investment in NSCs. The annual interest accrued every year shall also qualify for the deduction. Deduction upto Rs. 1,00,000 can be availed u/s 80C of the Income Tax Act for both investment and for accrued interest. The interest earned on NSC on a yearly basis is added to the total income under the head “Income from other sources” and the same is claimed as deduction u/s 80C, making the interest tax-free.
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