National Savings Certificate (NSC): A Simple Guide for Beginners

byDilip PrasadLast Updated: January 30, 2024

You can invest in NSC individually, on behalf of a minor, or jointly with another adult. While there is no upper limit for investments in NSCs, investments up to Rs 1.5 lakhs are eligible for tax deduction under section 80C of the Income Tax Act. This makes NSCs a suitable option for individuals looking to reduce their taxable income while earning a fixed return on their investment.

National Savings Certificate (NSC): Benefits, Type, Documents, Invest

National Savings Certificate (NSC), an investment scheme offered by the Government of India aimed at encouraging savings and providing a safe investment avenue for individuals. It is a popular savings instrument known for its stability, security, and guaranteed returns.

In this blog, we will take an in-depth look at the National Savings Certificate, exploring its features, benefits, eligibility criteria, and how it serves as a reliable investment option for both urban and rural investors.

What is National Savings Certificate (NSC)?

The National Savings Certificate (NSC) is a government-backed savings bond that offers small investments and tax-saving benefits. It was introduced in the 1950s as a way to contribute to the nation’s development. You can purchase NSCs from any post office in India, making it accessible to all Indian residents.

NSC is considered a low-risk investment option because it is backed by the government. It provides a fixed return over a period of five years, making it a popular choice for risk-averse investors who prefer a stable and guaranteed return.

You can invest in NSC individually, on behalf of a minor, or jointly with another adult. While there is no upper limit for investments in NSCs, investments up to Rs 1.5 lakhs are eligible for tax deduction under section 80C of the Income Tax Act. This makes NSCs a suitable option for individuals looking to reduce their taxable income while earning a fixed return on their investment.

Certificates of the National Savings Certificates (VIII Issue) will be issued in different denominations, such as Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10,000, and any other denominations specified by the Central Government.

What are the Benefits of the NSC?

  • Safe and Government-Backed: NSCs are backed by the government, making them a safe investment option with guaranteed returns.
  • Stable Returns: These certificates provide a fixed rate of return, ensuring stability and predictability in earnings.
  • Tax Savings: Investments in NSCs qualify for tax deductions under Section 80C of the Income Tax Act, allowing investors to reduce their taxable income by up to Rs 1.5 lakhs.
  • Flexible Investment: NSCs are available in various denominations, making them accessible for small as well as larger investments.
  • Long-Term Savings: With a fixed maturity period of five years, NSCs encourage long-term savings habits among investors.
  • Accessibility: Easily available at post offices across India, making them accessible to all Indian residents.
  • Transferable and Nomination Facility: NSCs can be transferred from one person to another and also allow for nomination, ensuring flexibility and security in investment ownership.

Non-Resident Indians (NRIs) are not permitted to buy National Savings Certificates. However, if a resident becomes an NRI during the maturity period, they can still enjoy the benefits of the certificates upon maturity on a non-repatriation basis.

Different Modes of NSC

The National Savings Certificate (NSC) offers different modes of holding to cater to various investor needs. These modes include:

  • Single Holder Type Certificate: This mode allows an adult investor to purchase the NSC for themselves or on behalf of a minor or a person of unsound mind. Additionally, a minor can purchase the certificate once they reach the age of 10 years.
  • Joint A Type Certificate: Under this mode, the NSC can be held jointly by up to three investors. Each holder has an equal share of the maturity proceeds. This means that the maturity amount will be divided equally among the joint holders.
  • Joint B Type Certificate: Similar to the Joint A Type Certificate, this mode allows the NSC to be held jointly by up to three investors. However, the maturity proceeds are paid out to only one of the holders as specified during the investment. This means that only one of the joint holders will receive the full maturity amount.

Types of Forms Required for Investing in NSC

Who Should Invest in the NSC?

Individuals who are interested in investing in the National Savings Certificate (NSC) must meet certain criteria:

  • Residency: The investor should be a resident of India.
  • Age: There is no age restriction for investing in NSC. In the case of a minor, an adult who is the legal guardian can purchase the certificate on their behalf.
  • Documentation: The investor needs to provide valid identity and residential proof, such as Aadhaar Card, PAN Card, Voter ID, Driver’s License, or other documents required by the post office or bank.
  • Non-residents: Non-resident individuals are not eligible to invest in NSC. However, if a resident who holds an NSC certificate becomes an NRI, they can continue to hold the certificates until maturity.
  • Restrictions on entities: NSC investments are limited to individuals and do not allow trusts or Hindu Undivided Families (HUFs) to invest. However, the head of a HUF (karta) can invest in NSC in their own name.

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 Online?

Starting from July 2016, the NSC form can be purchased in two ways: electronic mode (E-mode) or passbook mode. Paper certificates are no longer available, so to purchase the certificate, you will need to have a savings account with a bank or post office.

Here is a step-by-step guide to the process:

  • Open a savings account with a national bank or post office.
    The government has authorized Public Sector Banks and Private Banks to accept deposits under the National Savings Certificate scheme. Therefore, your account must be with one of these banks.
  • Activate Net Banking services for your account.
    Once you have activated Net Banking services, you will be able to purchase the NSC form in electronic mode through the bank’s online portal.

How to Buy the NSC Scheme in Passbook Mode?

Step 1: Open a savings account in a National Bank/Post Office.

The government has allowed Public Sector Banks and the top Private Banks to accept deposits under the National Savings Certificate scheme. Therefore, you should have a savings account with one of these banks.

Step 2: Purchase the certificate through a bank.

Visit the bank where you have the savings account and request to purchase the NSC in passbook mode. The bank will assist you with the process and issue an NSC passbook.

Step 3: Record transactions in the passbook.

The bank will record all transactions related to the NSC in the passbook. This includes the purchase of the certificate and subsequent transactions such as interest accrual and maturity.

Step 4: Sign and stamp the passbook.

Ensure that an authorized bank official signs and stamps the passbook to validate the transactions recorded in it. This step is important for the passbook to be considered as an official record of your NSC transactions.

Additionally, if you wish to transfer an already purchased NSC from passbook or paper mode to electronic mode, follow these additional steps:

Step 5: Visit the bank/post office.

Go to the bank or post office from where you originally purchased the NSC.

Step 6: Provide certificate details.

Provide the details of the NSC certificate to the bank/post office staff. This will include information such as the certificate number and date of issue.

Step 7: Collect the certificate in e-mode.

The bank/post office will process your request and provide you with the NSC certificate in electronic mode. In this case, the previously issued passbook will be collected and destroyed by the bank.

How to Buy the NSC Scheme from Post Office?

Step 1: Locate the nearest post office branch.

Identify the post office branch closest to you where NSCs are available for purchase.

Step 2: Obtain the NSC application form (Form-1).

Visit the post office branch and request the NSC application form (Form-1). Fill in the required details about yourself and the amount you wish to invest.

Step 3: Prepare the supporting documents.

Gather the necessary supporting documents, including a recent photograph, Identity Proof (such as Aadhaar Card, PAN Card, Voter ID, or Driving License), and Address Proof (such as Aadhaar Card, PAN Card, Voter ID, Driving License, or Rental Agreements for Residential Proof).

Step 4: Deposit the investment amount.

Make the deposit for the desired investment amount. You can choose to pay in cash, by cheque, or through a Demand Draft. Also, specify the name of the beneficiary.

Step 5: Collect and review the issued NSC.

Once the transaction is completed, collect the issued NSC from the post office. Take a moment to carefully review the certificate for any mistakes or errors.

Accepted Modes of Payment for Purchasing NSC

You can make payment for purchasing a certificate at a post office using any of the following methods:

  • Cash
  • Locally executed cheque, pay order, or demand draft made payable to the postmaster
  • By submitting a signed withdrawal form along with the passbook to withdraw funds from your Post Office Savings Bank account
  • Surrendering a matured old certificate, properly endorsed as: “Received payment through issue of fresh certificate via attached application”
  • Using electronic modes of payment if purchasing certificates from post offices operating on the Core Banking Solution platform

Procedure for Replacement of Lost or Damaged NSC Certificates

If your certificate is lost, stolen, destroyed, mutilated, or defaced, you can apply for a duplicate certificate. Here’s what you need to do:

  1. Apply at the post office where the original certificate was registered or any other post office (which will forward the application to the registered post office).
  2. Provide a statement with details of the certificate, such as the number, amount, and date, along with an explanation of the circumstances surrounding the loss or damage.
  3. If the post office officer confirms the loss or damage, they will issue a duplicate certificate upon the applicant providing an indemnity bond*. The bond can be in the form of an approved surety or a bank guarantee.
    • If the face value or total face value of the lost/damaged certificates is Rs. 500 or less, an indemnity bond may be issued without a surety or guarantee.
    • If the certificate is mutilated or defaced but can still be identified as the original one, a duplicate certificate may be issued without an indemnity bond, surety, or guarantee, provided the original certificate is surrendered.
  4. The duplicate certificate is considered equivalent to the original one for all purposes, except it can only be encashed at the post office where it is registered, unless verified beforehand.

*An indemnity bond is a legal document that serves as a guarantee or insurance against any potential loss or damage. In the case of NSC certificates, an indemnity bond may be required if the original certificate is not available. It assures the issuing authority that the duplicate certificate will not be misused and holds the bondholder responsible for any financial consequences that may arise. The bond may need to be backed by a bank guarantee or securities, depending on the value of the certificates.

National Savings Certificate Interest Rate

The National Savings Certificate (NSC) scheme has been serving as a trusted savings option for investors in India since May 8th, 1989. With its fixed income, tax-saving benefits, and low-risk nature, the NSC scheme continues to be a preferred choice for individuals seeking stable and secure investment opportunities. Whether you are looking to grow your savings or save on taxes, the NSC scheme offers a reliable and convenient avenue to achieve your financial goals. Consider exploring the NSC scheme if you value stability, tax benefits, and a hassle-free investment experience.

Disclaimer: Nothing on this blog constitutes investment advice, performance data or any recommendation that any security, portfolio of securities, investment product, transaction or investment strategy is suitable for any specific person. You should not use this blog to make financial decisions. We highly recommend you seek professional advice from someone who is authorised to provide investment advice.

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