National Saving Certificate

Definition: The National Saving Certificate or NSC is the small-saving government scheme offered by the department of post and is available in several denominations of Rs 100, Rs. 500, Rs. 1000, Rs. 5,000, and Rs. 10,000.

The National Saving Certificate is the fixed investment scheme backed by the government of India on which a fixed and regular interest is paid. NSC is one the most popular government schemes, as it is very simple to subscribe and easily available in the post offices.  The National Saving Certificates (VIII-Issue) has the following features:

1. Any individual who is a resident of India can invest in NSC, but however, the groups of people like HUF, companies, trusts cannot invest in this scheme.
2. The government of India decides the rate of interest for the national saving certificate. Currently, the rate of interest is 1% (w.e.f. 1 April 2016). The interest is compounded half-yearly while the amount gets credited to the account on an annual basis.
3. The subscriber does not get the interest payment every year; rather it gets accumulated so that the subscriber can claim interest amount for the tax deductions under Section 80 C of the Income Tax Act. It is to be noted that, the investments up to Rs 1,00,000 qualifies for the rebate under the section 80 C of the Income Tax Act.
4. No TDS is deducted on interest, but however, if the subscriber does not claim the interest amount for deductions, then it will be taxed as per the income tax slabs of the individual.
5. The subscriber can invest minimum Rs.100 under NSC, and there is no maximum limit for investment. If Rs. 100 is invested, then its maturity value after 5 years will be Rs 147.61 (Rate = 8.1% compounded half yearly)
6. The duration of NSC is 5 years, and the subscriber cannot withdraw the amount before its maturity. The amount can be prematurely withdrawn only in the case of subscriber’s death; the amount is given to the nominee or the heir of the deceased holder.
7. The National Saving Certificate can be used as collateral security to raise loans from banks.

Note: Earlier, there were two Issues of  National Saving Certificate, Viz. Issue VIII and Issue IX. NSC Issue IX got discontinued from 20 Dec 2015. Both the issues differed in terms of their tenures as well as the rate of interests. NSC Issue IX came with a maturity period of 10 years, with a rate of interest relatively higher than the NSC Issue VIII, having a maturity period of 5 years.