This article is an introduction to National Savings Certificates (NSCs), and describes its features.

(Want to know about saving income tax? Please read "Saving Income Tax – Understanding Section 80C Deductions")

NSCs have a maturity of 6 years. They offer a rate of return of 8% per annum. This interest is calculated every six months, and is merged with the principal. That is, the interest is reinvested, and is paid along with the principal at the time of maturity. For every Rs. 100 invested, you receive Rs. 160.10 at maturity.

NSCs qualify for investment under Section 80C of the Income Tax Act (IT Act). Even the interest earned every year qualifies under Sec 80C. This means that investments in NSCs and the interest earned on it every year, upto Rs. 1 Lakh, are deductible from the income of the investor. There is no tax deducted at source (TDS).

Following is the interest earned each year on Rs. 1,000 invested in NSC:

Interest Chart

NSCs are issued in the denominations of Rs. 100, Rs.500, Rs.1000, Rs.5,000 and Rs.10,000. The minimum investment needed is Rs. 100. There is no upper limit on investment.

Here are the features of NSCs in a nutshell:

1. Fixed interest, long term, virtually risk free avenue for investment
2. Available at authorized post offices
3. Maturity: 6 years
4. Rate of return: 8% per annum, compounded semi-anually
5. Qualifies for investment under Section 80C of the IT Act
6. No TDS
7. Can be pledged as a security for availing a loan
8. Denominations: Rs. 100, Rs.500, Rs.1000, Rs.5,000 and Rs.10,000
9. Minimum investment: Rs. 100
10. Maximum investment: No upper limit
11. Transferable from one person to another
12. Encashable prematurely, but with a penalty
13. Nomination facility available

For more details, please Click Here.

Other articles you might be interested in:

• Bhavishya Nirman Bonds
• Comparison between NSC and KVP
• Kisan Vikas Patra (KVP)
• ELSS is not for someone else

Related links from the web (Sponsored):

Articles by Category:

• Gold
• Income Tax - IT
• Insurance
• Investment Philosophy and Planning
• Loans
• Mutual Funds
• News / Developments
• Others / Miscellaneous
• Real Estate
• Stocks / Shares / Equities

Note: Please treat the opinion expressed here as a broad suggestion. Please consult your financial planner / investment advisor before making any investment decision.