What is the National Saving Certificate (NSC)?
National Savings Certificate NSC scheme is a fixed income scheme. It is one of the popular savings instruments in India. One can activate this scheme at any Post Office. NSC scheme is the Government of India initiative. Hence it guarantees returns. This savings bond encourages small and mid-income investors to save. Additionally, they can also get a tax benefit. NSC investments up to Rs 1.5 lakhs is exempt from tax under Section 80C of the Income Tax Act. They come with a lock-in period of 5 years. NSC certificates earn fixed interests. The current rate of interest is 6.8%. Like other fixed-income products PPF and Post Office FDs, NSC is also a secure and low-risk instrument. The minimum deposit is Rs 100. There is no maximum limit for investment in NSC. There is no TDS for NSC investments.
How to Buy a National Saving Certificate (NSC)?
To buy an NSC scheme, an investor needs to visit the nearest Post Office. They would need the original ID and Address proofs. Following the below steps will help in investing in NSC:
- Obtain and fill the application form with all the required details.
- For investor verification, produce the original copies of ID proof and Address proof.
- Upon verifying the documents, the investor can give the investment amount either via cash, demand draft, or cheque in favor of the postmaster.
- Lastly, to complete the process, choose a nominee, and get a witness signature.
Most importantly, only individual Indian residents can invest in NSC. Non-Resident Indians (NRI), Hindu United Families (HUF), and trusts cannot invest in the savings scheme.
National Saving Certificate (NSC) Interest Calculator
Interest for NSC is compounded half-yearly. The interest is payable to the investor at the end of the five years. The interest earned every year is reinvested. Let's take an example of Mr. Ajith. He wishes to invest INR 5,00,000 in an NSC at the current interest rate. Using Scripbox's NSC Interest calculator, we can calculate the maturity amount and the interest earned by him. We can follow the simple steps to calculate the maturity amount earned by Mr. Ajith.
- Go to Scripbox's NSC Interest calculator.
- Enter the amount of investment. In this case, it is INR 5,00,000.
- The term is already fixed at five years. This is because the NSC matures in 5 years.
- The interest is fixed at 6.8%. This is the current interest rate announced by the Ministry of Finance as of April 1st, 2020.
- Once the values are entered, click on calculate.
- The NSC Interest Rate calculator calculates the maturity amount. It also calculates the investment made and interest earned. In this case, the maturity value is INR 6,98,514.45. The investment is INR 5,00,000. The interest earned is INR 1,98,514.45.
Mr. Ajith's investment of INR 5,00,000 in NSC will earn an interest of INR 1,98,514.45 at the end of 5 years. The interest earned is taxable at the slab rate, Mr. Ajith falls.
Benefits of Using a National Savings Certificate NSC Calculator
Calculating the interest and maturity amount of NSC can be quite tedious and time taking. The interest is compounded half-yearly. The interest is added back to the investment. At the end of 5 years, the interest plus the principal is payable to the investor. It is quite natural that an investor wants to know how much an investment in NSC has grown. Scripbox's NSC calculator will help in calculating the maturity amount within seconds. Here are a few advantages of using Scripbox's NSC Interest calculator.
- Easy to use: The National Savings Certificate NSC Calculator is straightforward to use. All the investor has to do is enter the amount of investment. Once the investor clicks on calculate, it calculates the maturity amount.
- Time-saving: Using a National Savings Certificate calculator can save an investor's time. Investors don't have to go through the hassle of calculating manually. They perform complex calculations within seconds.
- Accuracy: NSC calculator is built with precision. The calculations are always accurate.
- Future planning: Investors can plan their financial future with accuracy. The calculator returns the exact amount their investment will reap upon maturity.
- Free to use: Investors can use the NSC calculator multiple times for free of cost.
NSC Interest Rates & Maturity Period
The two types of NSC certificates are NSC VIII Issue and NSC IX Issue.
- NSC VIII Issue – The VIII Issue comes with a maturity period of 5 years. The interest rate is 6.8% per annum.
- NSC IX Issue – The IX Issue comes with a maturity period of 10 years. This issue has been discontinued since December 2015.
National Savings Certificates VIII Issue is an excellent scheme. The initial investment and the accrued interest for the first four years enjoy the benefit of Section 80C of Income Tax Act.
Features of National Saving Certificate (NSC)
- Small Investments: NSC accepts investments as low as Rs 100. Making it easy for everyone to invest.
- Fixed Income: NSC guarantees return to its account holder. They can enjoy a regular income.
- Maturity Period: NSC schemes come with a maturity of 5 years. The 10-year maturity period issue has been discontinued from December 2015.
- Power of Compounding: Interest earned on NSC during the investment tenure is reinvested into the scheme by default.
- Corpus after maturity: The account holder receives the entire amount upon maturity. No TDS on NSC payouts. However, the investor should pay the applicable tax upon receiving the amount.
- Loan Collateral: NSC doesn't allow premature withdrawals. However, it will enable investors to avail loans by having the NSC certificate as loan collateral.
- Premature withdrawal: Premature withdrawals are not accepted for NSC investments. However, in exceptional cases like the death of investors or by court order, early withdrawals are acceptable.
- Nomination: The NSC scheme allows the investor to nominate any family member (even a minor). The nominee can inherit the returns in an unfortunate event of the investor's demise.
What are the Tax Benefits of NSC Investment?
Investment in NSC is eligible for tax exemption under Section 80C of the Income Tax Act. The interest earned during the tenure is added to the initial investment. It is qualified for tax exemption as well.
For example, for an investment of Rs 5,000 in NSC, the investor can claim for a tax benefit in the first year. From the second year onwards, the tax claim can include the interest earned on NSC in the previous year and the NSC investment made in the current assessment year.
There is no Tax Deduction at Source (TDS) for NSC investment payouts. However, investors have to pay. The tax is as per their income tax slab rates on the maturity amount.
Comparison of NSC with other tax-saving investments
|National Savings Certificate NSC||Public Provident Fund (PPF)||Fixed Deposit (FD)||Equity Linked Savings Scheme (ELSS)||National Pension Scheme (NPS)|
|Lock-in Period||5 years||15 years||5 years||3 years||Till retirement|
|Risk Profile||Low risk||Low-risk||Low-risk||Market-related risks||Market-related risks|
|Taxation||Investment is Tax-free under section 80c. Maturity: Interest is taxable as per income tax slab rates.||Under Section 80C, the investment is tax-free. Maturity: Interest and maturity amount is not taxable.||Investment: Tax-free under section 80c. Maturity: TDS on interest and interest is taxable as per income tax slab rates.||Under Section 80C, the investment is tax-free. Maturity: 10% tax on long term capital gains.||Investment: Tax-free under section 80c and 80d. Maturity: 60% tax free. 40% taxed in the year of receipt.|
What are the other tax-saving investments other than National Savings Certificate NSC?
The tax-saving investments that qualify for Section 80C of the Income Tax Act are:
Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme, Equity Linked Savings Scheme, National Pension Scheme, and Public Provident Fund. The following are the interest rates for each of these schemes.
- Sukanya Samriddhi Yojana - 7.6%
- Senior Citizens Savings Scheme- 7.4%
- Equity Linked Savings Scheme - 12-15% (market-linked)
- National Pension Scheme - 8-10% (market-linked)
- Public Provident Fund - 7.1%
Short Term MoneyBetter than FD
Frequently Asked Questions
National Savings Certificate is one of the fixed income investment options available in India. It is one of the popular savings instruments in India. NSC is a Government saving scheme. Hence it guarantees returns. This savings bond encourages small and mid-income investors to save. Additionally, they can also get a tax benefit. NSC investments up to Rs 1.5 lakhs are exempt from tax under Section 80C. The minimum deposit is Rs 100. There is no maximum limit for investment in NSC. This scheme comes with a lock-in period of 5 years. NSC certificates earn fixed interests. The current rate of interest is 6.8%. It is compounded annually. NSC is a low-risk investment.
The current interest rate on NSC is 6.8%. This rate is as on April 1st, 2020. It is compounded annually.
Upon maturity, the investor can encash the investment in hard cash. Alternatively, he/she can choose to get it transferred to his/her bank account. If the investor fails to withdraw, then the investment will earn interest. The interest will be similar to the post office savings account for two years. Post which the investment will not earn interest.
The interest is payable upon maturity. It is taxable as per the investor's income tax slab rate. The interest earned every year is put back into the scheme. It qualifies for tax deduction under section 80c of the Income Tax Act.
Tax on investment in NSC (government saving scheme) is only on the interest earned. The investment amount is tax-free. Let's take an example of an investor who invested Rs 1,00,000 in NSC. At an interest of 6.8%. Upon maturity, the investment will be worth Rs 1, 39,702.89. The interest earned is Rs 39,702.89. This interest is taxable at the investor's income tax slab rate.
No, premature withdrawals are not acceptable for NSC investments. However, in exceptional cases like the death of investors or by court order, premature withdrawals are acceptable.
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