This article is an introduction to National Savings Certificates (NSCs), and describes its features.
National Savings Certificate (NSC) is a fixed interest, long term instrument for investment. NSCs are issued by Government of India (the Department of Post). Since they are backed by the Government of India, NSCs are a virtually risk free avenue of investment. They can be bought from authorized post offices.
(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).
Interest Chart
Following is the interest earned each year on Rs. 1,000 invested in NSC:
| Year | Rate of Interest |
| 1 | Rs. 81.60 |
| 2 | Rs. 88.30 |
| 3 | Rs. 95.50 |
| 4 | Rs. 103.30 |
| 5 | Rs. 111.70 |
| 6 | Rs. 120.80 |
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.
Features of NSCs
- Fixed interest, long term, virtually risk free avenue for investment
- Available at authorized post offices
- Maturity: 6 years
- Rate of return: 8% per annum, compounded semi-anually
- Qualifies for investment under Section 80C of the IT Act
- No TDS
- Can be pledged as a security for availing a loan
- Denominations: Rs. 100, Rs.500, Rs.1000, Rs.5,000 and Rs.10,000
- Minimum investment: Rs. 100
- Maximum investment: No upper limit
- Transferable from one person to another
- Encashable prematurely, but with a penalty
- Nomination facility available
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