Who doesn’t want to save a bit as a financial hand for tomorrow? You must have come across terms like GPF, EPF, PPF, etc. when it comes to savings. This time, let’s know a bit more about another scheme, i.e., National Savings Certificate. But first of all, let’s know what National Savings Certificate is.
What Do You Mean By National Savings Certificate?
In this article
National Savings Certificate is one of the bright options you can fetch for investing. This is a safe and low-risk product for investors. It is an enterprise framed by our Indian government. For those who want capital security, then this is the plan for you to invest.
It is a savings bond scheme especially made for middle-income investors. It encourages funding as well as cutting on income tax under Section 80C. It provides a minimum limit of Rs. 100 with no TDS. As the Government provides it, it offers low risk as well as fixed income.
So in simple words like Public Provident Fund (PPF), National Pension Scheme (NPS), National Savings Certificate is also a risk-free mode of investment. It is highly flexible with a minimum limit of Rs. 100, and it also provides deduction to save tax according to section 80C. However, it’s applicable only up to the amount for Rs.1,50,000 giving relaxation of approximately Rs. 46,800.
The scheme is mainly for individuals Non- Residents of India. Hindu Undivided Families are not eligible for this scheme.
What Are The Features Of The National Savings Certificate?
National Savings Certificate abbreviated as the Indian government frames NSC. Mentioned below are some features that you must know before moving ahead.
i. In almost all post-offices, this scheme is accessible. Due to having offices in most areas of our country, this scheme is readily available.
ii. This policy is for people with a secure basic wage. It means the interest you get on the principal is income you will fetch with barely any risk.
iii. It is a savings bond scheme, especially for middle-income investors. It even encourages its customers to invest while saving on income tax under Section 80C.
iv. Currently, the interest rate of this certificate is 6.8%. Changes every quarter according to the announcements of the ministry of finance.
Section 80C:
One of the very well known clauses in our law is Section 80C. It is the act that allows a tax deduction of Rs.46 800. The total net investment through Equity Linked Savings Scheme (ELSS), National Saving Certificate (NSC), or other tax-saving FD is Rs. 1,50,000.
Eligibility Of The National Savings Certificate
Just like all other forms, it has its own eligibility criteria as well-
1. One must be a citizen of India with the proofs like passport, PAN card, Aadhar card.
2. Trusts and organizations, specifically Hindu Undivided Families (HUFs), cannot make investments into NSC.
3. The head of the Organisation can invest in NSC on his individual name.
4. NRIs are also not eligible to purchase this schema.
5. NRIs who were India’s residents before but now before NSC’s maturity shifted to foreign can hold their NSC.
6. Unlike NPS, there are no age limit restrictions for purchasing NSC scheme.
7. A minor can also buy this for an adult.
How To Purchase The National Savings Certificate ?
i. Simply from any post office- approach the nearest post office. Make sure you do a counseling session with the representative. Take that form with you at home too.
ii. In almost all corporate banks. These private banks are ICICI, HDFC, and AXIS Bank, but all Public oriented banks have this scheme
iii. Your investment is stored in two modes: e-mode, i.e., electric mode and passbook mode. Passbook mode is the same as the facility you avail of for bank accounts.
iv. In the Indian Post-office, you can easily submit the filled NSC form.
v. Added to that, you must also submit self-attested copies of required KYC docs for verification purpose
vi. Make the payment of invested via cash, credit or debit cards, cheques, or net banking.
vii. Then, NSCs of the related amounts will get recorded. Added to that, it also can get accumulated from the post office
Focal Points Of The National Savings Certificate
1. Tenure
Its maturity period ceases in 5 years. However, a PPF tenure ends in 15 years. So if you want short term investment, NSC is better. For long term goals, you can prefer PPF, although both share the same rate of interest in this quarter.
2. Bounds
The minimum bound for the venture is Rs. 100, and when the maximum limit gets concerned, there is no limit. Thus making this scheme user friendly and flexible.
3. Rate Of Interest
The rate of interest varies with time. It varies according to the announcements of the Ministry of Finance. This quarter, the interest rate is 6.8% but will change after June due to updates for the new quarter.
4. Nomination
He can nominate any of his family members in case he dies suddenly. Even minors are also eligible to receive his investment in NSC according to their will.
5. Functional Responsibility
The Ministry of Finance designs the product. It’s framed in discussion with higher authority committee members / National Savings Institute. However, accountability of any issue is taken by the respective bank. Post office and ministry of finance too.
6. NRI
NRI(s) are not authorized to invest in National Savings Certificate. Although if they get shifted to foreign between the scheme’s tenure, then the scheme will remain valid till maturity.
7. Minimum Investment
The minimum amount that can be you can purchase for a certificate is Rs. 100. The various prices that you can purchase for the certificate are Rs. 10,000, Rs. 5000, Rs. 1000, Rs. 500 and Rs. 100. At the start, little investments can get prepared, and one can add on savings when possible.
8. Categories Of NSC
In the beginning, there just two certifications available. One was the NSC IX issue, and the other one was NSC VIII. But, from December 2015, the Indian government withheld the mark of NSC IX. Thus, the NSC VIII issue is at hand to access.
Under section 80C of the IT Act, in the NSC VIII issue, the interest you earned for 5 years also get accrued
Modes Of Holding The National Savings Certificate
a. Single Holder Type Certificate
You can purchase it either by a minor or a banker. This is the mode where only individuals can purchase the certificate. Yet, you can nominate as many as the nominee as you want, including minors.
b. Joint A Type Certificate
Here certificate gets shared between two members with equal maturity value to each of them. Here also nominee terms are the same as single holder type.
c. Joint B Type Certificate
It is also a joint form, but the maturity money’s given to a single holder. It means two or more persons are investors, but the investment will only return to a single person. It gets decided to be having nominee terms the same as the above two.
Documents Required For The National Savings Certificate
a. Application form of NSC– You can collect the form for NSC from any nearest post office or bank.
b. Identification proof – The docs related to identification such as Passport, PAN, Voter ID, etc. must be present in the original form with you at registration.
c. Photograph – Carry with yourself self-attested passport size photographs.
d. Address proof – Passport, Bank statement with a cheque or electricity bills, or any such bills can be referred to as address proof.
Access Of The National Savings Certificate
You must carry with yourself your KYC details and submit them to the post office for purchasing it. Moreover, it is convenient to relocate the scheme certificate to different post-offices. You can also relocate it between different personnel. However, it must get carried out without hampering the authentic maturity certificate. Apart from that, the interest also gets added up.
Benefits Of The National Savings Certificate
a. Tax– The first benefit every individual seeks from this scheme is that it saves tax under section 80C for up to 1.5 Lakhs annually. As per 80C, one can save tax on the value of the expense of total Rs. 1,50,000. So after the net value, it is worthless to invest in saving in tax. But the net of Rs. 1,50,000 do not include interest or returns you get.
b. Interest Rate– This scheme provides interest rates that get updated quarterly by the government. It assures a constant brook of income. Presently they proffer a 6.8% rate of interest. Yet, it might change after June by the ministry of finance as per the quarterly changing policy. In the form of interest, one will get income regularly.
c. Maturity– Its tenure period ceases within 5 years. Before, there were two options for the tenure of maturity, i.e., 5 yrs and 10 yrs. But after updating the terms of the scheme, the facility of 10 yrs maturity gets abolished.
d. Compounding Power– The interest rate on the principal amount gets compounded annually. That is, you get returns on returns per year. This means that the amount you get from one year is now invested as Principal for the second year, and so you get a return over return. That’s amazing! Isn’t it?
e. Investment friendly– This scheme has a lower bound of Rs. 100 only, which makes it friendly. In a way, you can start investing with this much low amount, makes it User friendly for all sections of society.
f. It allows you to invest through a small start. One always needs a start for success, and this scheme is a resemblance to the stated fact.
g. If you lose the authentic certificate, don’t worry. You can ask for a corresponding copy as well.
h. The whole part of this scheme’s interest, excluding the final year interest part, is tax-free. It enables you with more saving benefits.
i. Even after the maturity of the scheme, one can again renew it.
j. You can also transfer it between individuals once in the lock-in period.
Tax Benefits On The National Savings Certificate
The subscriber can get tax deduction under Section 80C, investment up to Rs 1.5 lakh in National Saving Certificate. This provided you with an extra benefit where your former interest. By this, you can also avail of the tax breaks. Great! Isn’t it?
For example, you procure a certificate for Rs 1,000. By this, you get the eligibility for tax reimbursement on that preliminary investment. This can get implemented in the starting year itself.
Loan Against National Savings Certificate NSC
1. Margin applicable on loan depends on the maturity period. Currently, few banks offer this facility.
2. The interest rate depends on the applicant as well as the bank. The tenure of the loan is equivalent to the maturity time left of NSC.
3. You can also use it as security for loan approval from banks. It means it acts as collateral can give you relief in a crisis, unlike mutual funds.
Premature Withdrawal Procedure Of The National Savings Certificate
NSC is strictly for a fixed period of 5 years but can be withdrawal in case of:
- In case the NSC bearer passes away.
- Renunciation by a covenant, which is a gazetted government official.
- As per legal advice for an untimely extract of NSC IV.
- Upon premature termination or maturity, the depositing authority pays in cash Rs. 20,000 /. Added to that, payment is also made by cheque.
Although you might need some documents for the whole procedure:
- You must deliver the original National Savings Certificate.
- Make sure you also handover the NSC encashment form.
- Identity proof is a necessary tool in every submission.
- In the case of a minor, Guardian attestation is necessary.
- In the subscriber’s demise, you need to present the forms of Annexure I and Annexure-II. Handover the annexure-1 at your listed post-office, and II is used as legal proof.
Transfer To Another Office
You can transfer your NSC to another branch by filling form NC- 32 or NC- 34 in the post office. Through NC – 34, you can avail facility once in the whole maturity tenure.
Comparison
There are various other tracks for you to invest in. Compared to Equity Linked Savings Schemes (ELSS), NSC offers low risk, from Public Provident Fund (PPF). Even the National Pension System’s maturity period is very less.
NSC Calculator
A subscriber can make sure of an NSC calculator to know how much money you can earn from his expenditure. For that, you need to go to the site.
https://www.incometaxindia.gov.in/Pages/tools/interest-on-national-savings-certificate.aspx.
Mentioned below are few points that you must go through for the interest calculation-
i. The different types of NSC.
ii. The entire sum of money you funded.
iii. The year in which you bought the scheme.
This is the basic formula of compound interest:
A = P (1 + r/n) ^ nt where n=no. of times interest gets compounded annually, r= rate of interest, A= amount, P= Principal and t= time
- Here the first step is to enter your total invested money in place of P.
- Then enter the total time of maturity as t.
- If it gets compounded half-yearly, then the value of n will be ½, and for quarterly, it is ¼.
- And finally, you can calculate the amount.
FAQs
1. For how long we need to keep NSC to double the amount?
This solely depends on the interest rate and invested amount. However, you can calculate it through the compound interest formula. In the above formula, but the value of A=2P and find t.
2. What is the maximum limit for an individual to purchase a scheme?
There is no upper limit, so one can buy as much as he wants, but Rs’s lower limit. 100
3. What is the current interest rate for 2020 offered by the post offices?
It is 6.8 % for this Quarter.
4. Is nomination applicable for NSC?
Yes, You can nominate as many members as you want. In fact, minors can also get nominated.
5. Is there any confined period?
Yes, The whole maturity period is confined as it is a fixed type of investment. Withdrawal is possible before maturity in specific conditions stated above.
6. Is the benefit in IT act for Rs. 1 Lakh or 1.5 lakhs?
The profit and deduction endowed under section 80C are for Rs: one and a half lakh rupees. Confusion arises when you analyze at the bound for 80C before 2014. However, there was an altercation with a max of Rs. 1.5 hundred thousand from 2015.
7. Can we cancel the nomination or changed?
Yes, by filling form 3, you can either cancel or change the nomination with the nominal fee of Rs.5.
8. I am not a resident of India but an Indian. Can I apply for NSC?
No, This scheme is not provided for non-resident Indians.
9. What are the characteristics of NSC VIII?
The main feature of the NSC issue VIII is that there is no maximum investment limit. It comes with 6.8% per annum with no TDS interest rate. This scheme’s investment can get used to seek a loan and can fetch benefits on tax up to Rs. 1.5 lakhs as per the norms of Section 80C. Its period of maturity is five years in total. The trusts and HUFs are not eligible to avail of this scheme. Added to that, this scheme offers the least amount denomination of Rs. 100.
10. Are armed forces eligible to invest in this scheme?
Precisely, Armed Forces personnel are eligible to invest in NSC. In their case, either they should pass their posts. If hey have placements in the desert, the postmaster may get engaged by the forces to compensate the nominee with the whole amount invested in the scheme.
11. What are the characteristics of NSC IX?
The features involve a policy period of 10 yrs. With money denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000 and Rs. 10,000. However, the Indian government has ceased this policy.
12. Can I take a policy on a joint holding basis?
If you are not part of any trust or Karta of HUF, you can purchase NSC on Joint holding. In fact, NSC provides two different options for joint holding.
13. Will tax deduct on NSC interest at source?
No TDS is applicable on interest earned on savings in NSC. The tax gets implemented in the interest of previous years. For the last year, tax is not implemented on interest, and certificate holders can use it as proof for tax.
Conclusion
As now so far, you get to know about NSC from all tangible angles. Now it would be easy for you to analyze the whole scenario. As this is a low-risk scheme, it adds diversification to your portfolio. This also opens the path for investors who do not want to take risks on their hard made income. I hope this article bought some light on your knowledge about the National Savings Certificate.
How would I know IT purpose the amount of interest paid on my NSC deposit each year and reinvested?
S S Bhojwani