National Savings Certificate (NSC), is a fixed-income investment/savings scheme that is backed by the Government of India and it offers assured returns as well as tax benefits. Investors can buy this certificate at any post office across the country as long as you have a savings account at that post office. This savings scheme mostly attracts small to mid-income investors who want a no-risk investment option that will also let their money grow.
At present, the rate of interest received by investors of the NSC scheme is 7.7% per annum. The minimum NSC deposit must be Rs. 1,000 and the lock-in period is of 5 years. Lock-in period indicates the span of time when you are not allowed to redeem the amount.
Let us go into the details of this savings scheme.
What are some of the benefits of the NSC?
Let us look at some of the key benefits offered by National Savings Scheme:
- Nominee benefits: A family member of the investor, even a minor can be a nominee, who will get the returns upon maturity if the investor has passed away. There can be a single nominee except where the denomination of the NSC is Rs. 500 or above.
- Tax savings: Under Section 80C of the Income Tax Act, an investor can avail of tax exemption of up to Rs.1.5 lakh in a year.
- Easy accessibility: To purchase the scheme, minimal documentation and KYC verification is required. The certificate can also be transferred easily from one post office to another.
- Loan collateral: NSC certificate is accepted as security for loans by banks and NBFCs.
- Power of compounding: The interest you are supposed to receive on your investment gets compounded and reinvested towards the scheme. Therefore, the invested amount of the individual keeps increasing.
- Corpus on maturity: The investors will get the total matured amount since there is no TDS applicable on NSC payouts.
- Zero-risk investment: Backed by the Indian government, this scheme is considered to be a low-risk investment option.
Different Modes of NSC
Here are the different modes in which investors can hold National Savings Certificate:
- Single Holder Certificate: These certificates are issued to one individual. The holder can name a nominee for certificate. These certificates can also be issued to the legal guardian of a minor. When the minor becomes a legal adult, they become the holder of the certificate after providing proof of identity and age.
- Joint ‘A’ Certificate: These certificates are issued to two holders. When the investment period is over, the amount is paid to both the holders. The decision-making power is also shared by both.
- Joint ‘B’ Certificate: This certificate is also issued to two adults. The main difference between ‘A’ and ‘B’ type certificates is that the matured amount in the latter is paid to any one of the joint holders.
Who Should Invest in the NSC?
If you want to make a safe investment and earn a steady interest along with tax exemptions, NSC is ideal for you. Here are some points you should note before considering the NSC investment:
- Hindu Undivided Families (HUFs), Trusts, Non-resident Indians (NRIs), Private and Public Limited Companies (PLCs) are not eligible to invest in NSC.
- A person must be an Indian citizen to make this investment.
- All individuals, minors above 10 years of age, and legal guardians or parents on behalf of a minor can make investments in a National Savings Certificate.
What Are the Necessary Documents for the NSC Scheme?
Here is a list of the documents needed to invest in the National Savings Certificate:
- ID proof, such as PAN, Aadhaar card, voter ID, driving license, etc.
- Address proof such as electricity bill, bank statement, passport, etc.
- Photograph
How to Buy the NSC Scheme?
There are two ways to buy the NSC scheme, electronic (e-mode) and passbook mode. Below are the guidelines for opting the certificate in electronic form:
- If you have a savings account with a post office, you can buy NSC certificates in e-mode.
- You should have access to internet banking.
- Log in to DOP internet banking
- Go to ‘General Services’ and click on ‘Service Requests’. Then you will have to choose ‘New Requests’.
- Click on ‘NSC Account- Open NSC Account’
- Enter the amount you want to deposit (minimum INR 1000) and add the details of your post office savings account from which the amount will be debited.
- Accept the terms and conditions that pop up.
- Enter the password that you receive and click on ‘Submit’
- You will next get the option to download the receipt for the deposit.
If you do not have a savings account, you will have to open an account and apply for internet banking before making the online NSC scheme purchase.
The guidelines for obtaining the NSC certificate in passbook mode include:
- If you do not choose the electronic mode, you can buy NSC in passbook mode. It is referred to as an e-mode format printed or recorded in a passbook.
- Your transactions will be printed or recorded manually in a passbook.
- Passbook will be issued with the physical signature of the authorized official.
- In case of the passbook mode, the post office or bank branch will take receipt of the passbook by the customer, in the account opening form in lieu of having received the same.
Calculating the Interest with the NSC Calculator
It is possible to calculate the interest rate of an NSC savings scheme with a National Saving Certificate calculator. You can also perform a manual calculation to determine the total interest on your investment. However, using an online NSC interest calculator is a quicker and error-free procedure. The NSC calculator works on the compound interest formula. The interest is compounded annually. So, the formula to calculate the maturity amount will be:
P [1+ R/100]^n
Here, P is the investment amount, R is the interest rate (7.7% p.a. is the current rate) and ‘n’ is the lock-in period, which is 5 years. Once you derive the maturity amount, subtract it from the invested amount to get the total interest.
The Procedure to Redeem NSC Investment
You may redeem your NSC investment amount in e-mode after maturity. Simply log into your internet banking account used to purchase the NSC certificate. You must raise a request for redemption of the invested amount through the portal. You will receive the amount in your linked post office savings account.
If you have an NSC passbook, visit the post office branch that issued it and fill out a redemption request form. You will also need to attach documents like the NSC passbook and ID proof. After submission of these documents your redemption request is processed, and the amount will be credited to your bank account.
When Do You Need a Duplicate National Savings Certificate?
The National Savings Scheme or NSC is a preferred savings tool in India. When the NSC is purchased, the depositor will receive an official document containing the details of the investment. This document is needed when an investor’s scheme matures or when he or she wants to withdraw the funds.
In case the original NSC certificate is lost or damaged, the depositor should apply for a duplicate certificate to ensure that they can receive the funds without any hassle. The following steps must be followed to get a duplicate NSC certificate:
- Fill up the Form – NC29, which is the application form for duplicate certificates and submit it at the nearest post office branch.
- Along with this application form, submit a statement with the lost or damaged NSC account number, name, invested amount, date of issuance and the reason you need a new certificate.
- You also need to submit an indemnity bond as well as one or more sureties or bank guarantee. This is not required if your original certificate is defaced.
- A nominal fee will be charged for a duplicate certificate fee.
Conclusion
The NSC scheme has existed since 8th May 1989 and it continues to be one of the most preferred saving options among conservative investors in India. The government has made several attempts to make this scheme accessible to the investors. If you are looking for a scheme that offers you a fixed income, tax saving benefits and involves low risk, this is the most suitable investment option for you.
