National Savings Certificate

National Savings Certificate is a form of tax saving investment that can be bought by the individuals by means of a savings certificate issued by the post office of India. This investment option is available only to the residents of the country. The investment in NSC is a low risk investment with fixed return and is usually preferred by the risk averse class of individuals.

The interest rate offered on NSC is decided by the Government of India and is determined at the start of every financial year. However, the government can change the rate of interest applicable from time to time depending on the market volatility and various other factors that factor in determining the rate of interest of a particular product.

The current rate of interest on the NSC is 7.9% which is compounded annually. However, such interest is payable only at the time of maturity and is not liable for a TDS deduction under the Income Tax Act, 1961.

The NSC was available in two tenures namely,

• NSC VIII for 5 years
• NSC IX for 10 years

Currently, the only available option of NSC available for investing is the NSC VIII category and the investor can hold the NSC in the following modes,

Single Holder Type Certificate – 

The investor in this case can hold the National Savings Certificate in his/her individual capacity or on behalf of a minor.

Joint A Type Certificate – 

The NSC in this case is held jointly by two holders and the proceeds are to be shared equally by both the holders at the time of maturity.

Joint B Type Certificate – 

In this type of certificate, the investor gets the option to hold the NSC jointly but the proceeds at the time of maturity are entitled only to a single holder.

Eligibility for NSC

The eligible investors for the NSC are,

• All the resident Indians are eligible to invest in NSCs except the Trusts and HUFs (Hindu Undivided Family).
• The Karta of the HUF, however, is eligible to invest in the NSC in his/her individual capacity.
• The investment in NSC is not open to the NRIs, however, if a resident becomes an NRI prior to the maturity of the NSC, such investment is still valid and can be held till maturity.

Features and Benefits of the NSC

The various key features and benefits of the Government issued NSC are highlighted below.

• The NSCs are issued by the Government of India but can be purchased easily at any of the post offices across the country.
• The minimum amount of investment that can be made under NSC is Rs. 100 with no upper limit on the amount of investment that can be made by an investor
• Also, such certificates are available in the denomination of Rs. 100, Rs. 500, Rs. 1,000, Rs. 5,000 and Rs. 10,000.
• The investor has the facility to nominate a person who will receive the corpus fund invested in the event of death of the investor prior to maturity which is a period of 5 years (fixed). Such nominations can be done via Form 1 or Form 2. Furthermore, any change in nomination can be done via Form 3.
• The principal amount invested under NSC is eligible for a tax deduction under section 80C of the Income tax Act, 1961.
• The interest earned on such investment is deemed to be reinvested for the initial 4 years as the interest is compounded annually but paid at the time of maturity. Hence such interest is also eligible for the deduction under section 80C of the IT Act, 1961.
• However, the interest for the fifth year is not to be re-invested as it is the final year of the investment and hence is to be paid to the investor along with the entire investment. Such interest received at the end of 5 years or at maturity is taxable in the hands of the investor according to the applicable tax slab rate of the investor.
• The interest on the NSC is one of the highest rates in the market with lower risk compared to the other similar products in the same investment category as such investment is backed by the government, thus making it a very lucrative or appealing investment for the prospective investors.
• The NSC can also be purchased by an eligible investor on behalf of a minor.
• NSCs are also widely acceptable as collateral by the majority of banks and the NBFCs for the issue of loans in case of any need.

Documents required for applying an NSC

The list of documents required for applying for NSC is given below.

• Application form duly filled and signed
• Original Documents for Identity Proof
• Original Documents for Address Proof
• Cheque or cash or Demand Draft (to be issued in favor of the Postmaster of the Issuing Post Office) to be deposited for investment along with the application
• Recent photographs

Transfer of Certificates

The NSC issued can also be transferred in the following two manners

From one person/holder to another – 

• Such transfers can be done by submitting a written application for the same along with a duly filled and signed Form NC-34 at the issuing post office. Such transfer can be effected only once during the tenure of the investment and will require a written consent from the postmaster of the place of issue of the NSC certificate.

From one post office to another – 

The transfer of the NSC investment from one post office to another can be done by submitting a written application for the same along with a duly filled and signed Form NC-32 at the issuing post office. In case of joint holding of the investment (Joint A Type or Joint B Type), the joint holders as well have to sign the application.

Issue of Duplicate NSC

The government has a safeguard for the investor in the event of loss or theft or mutilation or destruction of the NSC. The investor can request for the issuance of a duplicate NSC in such case. The investor has to fill the Form NC-29 and duly submit it at the original issuing post office. The investor has to necessarily include the following details along with a written application stating the reason for the need of such duplicate NSC.

• Details of the certificate (NSC issue, denomination, etc.)
• Date of issuance of the original certificate

FAQs