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National Savings Certificate (NSC)

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An initiative of the Government of India, the National Savings Certificate is a fixed income investment policy which you can conveniently open through any post office. This is a savings bond scheme that allows investors to seek a fixed return on investment with low risk. Generally, NSC is favoured by those who want to bear low-risk and to diversify their assets via the instrument of fixed return. 

The National Savings Certificate is a scheme of fixed income savings that you can access through every post office. An initiative of the Government of India, it is a savings plan that allows investors – primarily low to mid-income investors – to save on income tax while investing. As a fixed-income method such as the Public Provident Fund, Bank Fixed Deposit and Post Office FDs, this plan is a secure and low-risk option too. You can acquire it on your behalf from your nearest post office, for a minor or as a joint account with another individual. NSC comes with 5 years of fixed maturity period. There is no upper cap on the purchasing of NSCs, but under Section 80C of the Income Tax Act, only investments up to Rs.1.5 lakh will give you a tax break. Features of NSC & Why should you consider investing in NSC?

Key Benefits of National Savings Certificate

Previous NSCs are accessible with two tenures-5 years (NSC VIII) and 10 years (NSC IX).

Previous NSCs of two tenures-5 years (NSC VIII) and 10 years (NSC IX) are valid. Since NSC IX is terminated, only the five years NSC VIII is still accessible to get enrolled. Key benefits of NSC are:

  • For a set maturity duration of 5 years, NSC can be conveniently achieved at any Indian Post Office.
  • The interest rate is subject to periodic change according to declarations from the Ministry of Finance. 
  • The minimum amount needed for a deposit in a National Savings Certificate is Rs. 100, with no maximum limit on deposit.
  • As a tax-saving scheme funded by the government, you can save for up to Rs.1.5 lakh to claim the benefits of 80C deductions.
  • Interest is calculated quarterly but only charged at maturity, without any TDS deduction. 
  • All the major banks and NBFCs hereby recognize the National Savings Certificate as collateral or protection against the insured loans. 
  • In case of an investor's sudden death, the investor himself can appoint any individual of his family (minors are also eligible) to recover his investments in NSC. 

Eligibility Required to Invest in National Savings Certificate

Below-listed are the primary eligibility conditions for making investments in National Savings Certificate:

  • All Indian citizens are eligible to invest in NSCs.
  • NRIs are not eligible to invest in NSCs.
  • Indians who are not tenants can not purchase new NSCs. Moreover, in the case of resident NSC subscribers being NRI before the certificate maturity, these NSCs can be kept until maturity.
  • Karta of HUFs can make investments to NSC against his/her own behalf.

Required Documents

Before making investments in an NSC, keep handy all the below-listed documents. To acquire NSC in applicable denominations, these documents can be submitted at any post office of India. 

  • Duly filled NSC Application form
  • Passport
  • Permanent Account Number
  • Voter ID
  • Aadhaar Card
  • Driving licence
  • Senior Citizen ID, or Government ID
  • Recent passport size colour photographs
  • Cheque to be filled with the amount to be invested
  • Residence proof such as electricity bill, Passport, telephone bill, bank statement etc.

Why should I Invest in NSC?

Just like some other fixed-income investments such as Public Provident Fund and Post Office FD, NSC also offers guaranteed returns and capital security. Generally, National Savings Certificate has been promoted by the government as a savings scheme for citizens of India. Below listed are not eligible to invest in NSC. 

  • Hindu Undivided Families (HUFs)
  • Trusts
  • Private and public limited companies
  • NRIs

Features of National Savings Certificate

The below listed are the features of NSC:

Interest rates: The annual fixed interest of NSC is subject to change on a quarterly basis by the government, thus guaranteeing a stable income for the investor.

Flexible tenure: The scheme initially had two forms of certificates – NSC VIII Issue (tenure of 5 years) and NSC IX Issue (tenure of 10 years). In December 2015 the government halted the NSC IX Issue So, the NSC VIII is currently available to purchase.

Tax saving scheme: As the scheme is regulated by the central government of India, the capital invested in NSC qualifies for tax savings under Section 80C of the Income Tax Act up to Rs. 1.5 lakhs yearly.

Flexible investment scheme: Under National Savings Certificate you can invest from a minimum amount of Rs 100 with no maximum cap for invest.

Easily accessible: After submission of correct KYC documents it can be easily purchased from any post office. And also it is transferable from one Post Office to other and even one individual to another. 

Premature withdrawal: One can close and exit from the scheme except on the unnatural death of the investor. 

Tax benefits under NSC

NSCs are mainly tax saving investments as the principal amount invested provides tax deduction under Section 80C up to the cap of Rs. 1.5 lakhs. The interest generated annually from NSC (for the first four years) is thus considered to be reinvested exempt from tax and therefore qualified as a further deduction under Section 80C (subject to the Rs 1.5 lakhs gross annual limit). The interest earned in the fifth year, though, is not re-invested and taxable according to the applicable slab limit of an investor.

Loan Against NSC

Below are some key terms and conditions for the eligible individuals in order to avail loan against National Savings Certificate.

  • Only Indian residents are eligible to apply for a loan against NSC
  • Currently, this service is provided by some major private and public-sector banks
  • The applicable margin to loan against NSC is determined on the remaining period to maturity
  • The interest rate on NSC investment differs according to the individual loan borrower and the bank that provides the loan
  • The loan term is equivalent to the residual maturity of the NSC used as pledge

Transfer of NSC

NSC is transferable and can be transferred from post office to another and also from person to person. And the best thing is it will not affect your interest accrual/maturity of the original certificate. NSC enables an investor to carry the following transfer options. 

  • One can transfer from one post office to another by filling and submitting the Form NC-32 at the post office which approved the original certificate earlier. 
  • Transferring National Savings Certificates from one holder to another can also be performed by filling out Form NC-34 at the post office issuing the NSC. It can only be performed once during the maturity period.

Premature Withdrawal of NSC

NSC VIII has a 5 year lock-in period with premature withdrawal allowed only in specific cases like:

  • In case the death of NSC holder.
  • Upon loss by a pledgee who is an official of the Gazetted Government.
  • On legal order for NSC premature withdrawal

How to issue Duplicate National Savings Certificates

In case lost or stolen of the initial NSC certificate you can request to issue a duplicate certificate. Just you have to do is fill out Form NC-29 and submit it at the nearest post office. The form includes some key fields such as:

  • Details of the certificate(s) such as– serial numbers, denominations, NSC issue, etc.
  • Issuance date of the certificate

Types of NSC Holding

There are several forms under which NSC certificates can be issued, and they are:

Single Holder Type Certificate

As the name indicates, this kind of certificate can be possessed by just a single individual. These certificates are given to single individuals only and joint holders are not allowed. The nomination of nominees is permissible but the person in whose behalf the certificate is granted has the only right to add a nominee. 

Joint ‘A’ Type Certificate

Joint A type certificates are those given to 2 individuals. The amount is payable on maturity to all the individuals who are shared holders of the certificate. In the event that the certificate has to be transferred or revoked, or a nominee needs to be switched, a signature is required from both the joint holders. 

Joint ‘B’ Type Certificate

Joint B type certificate pays the maturity amount to any of the 2 joint certificate holders which is the major difference between Joint A and Joint B type certificate. This maturity payment is not allowed to both the certificate holders in case of Joint A type holding as discussed above. 

Process to invest in NSC

On submission of necessary KYC documents NSC can be purchased from any Indian Post Office. NSCs can not currently be purchased online, hence you have to do it manually by following the below given process.

  • Download the NSC Application form online or visit your nearest Indian post offices to get a form
  • Now fill the application form with all the necessary details correctly
  • Attach all the self-attested KYC documents such as Passport. Permanent Account Number (PAN) Card. Voter ID. Driving licence, Aadhaar Card, Passport size photograph.
  • Now make payment of the amount that you want to invest by cash or through cheque
  • Once your documents are verified your certificate will be processed and you will be provided with a certificate from the post office

How to transfer your National Savings Certificate?

National Savings Certificate (NSC) is among the tax saving investment that offers investment tax deduction at a recommended upper ceiling authorised by the Department of Income Tax. A group of people are putting their money into NSCs as part of the investment in tax saving. Under Section 80C of the Income Tax Act, an individual invested in National Savings Certificates is allowed to claim a tax break of up to Rs 1.5 lakh. There are some other tax saving strategies that include an investment tax cut of Rs 1.5 lakh, and the interest received after maturity is excluded from tax. Two forms of National Savings Certificate are accessible, i.e. NSC issue VIII and NSC issue IX. NSC issue VIII has a maturity tenure of 5 years, while NSC issue IX has a maturity tenure of 10 years. NSCs receive interest rate that is compounded on an annual basis and payable when the maturity term is completed. Under the new NSC transfer rules, a National Savings Certificate can only be transferred once during the period of its term. NSC can only be transferred after one year from the date of issuance. This provision is not applicable if the transfer is made at the death of a joint holder to a family member, legal heir to a deceased holder, on legal procedures or to existing heirs. The transferee must be eligible to purchase the certificate for transfer. 

FAQ's

Can the NSC be withdrawn before the maturity period?

Ans: Article 16 (1) of the Indian Constitution allows premature withdrawal from the National Savings Certificate(NSC) account only under the following conditions:
1) on the death of the holder or one of the holders in the case of joint holders.
2) in the event of forfeiture by a pledgee being a designated government official when the pledge complies with these rules.
3) By court order.

However, if you cannot wait until maturity, the only option for you is to borrow from a bank by promising the NSC under rule 12 of subsection 16 (1). of the Indian Constitution.

This rule specifies that the NSC can be pledged on a request to the postmaster of your post office, giving him the mandate to transfer the certificates in guarantee to one of these parties:

President of India or Governor of your state. Reserve Bank of India or a cooperative society or a regular bank. A company or government organization. A housing finance company supported by the National Housing Bank and notified by the central government, and a local authority

Can the NSC be transferred?

Ans: Yes, you can transfer your NSC account from the post office where you originally opened it to any other post office across India, as per your convenience, provided it has not reached maturity.

Can the NSC be withdrawn from any post office?

Ans: Yes, you can withdraw your NSC from any bank or post office, not necessarily the bank or post office where you opened it.

Where can individuals buy a National Savings Certificate (NSC)?

Ans: NSC's can be purchased at any authorized or major post office.

What is the procedure for purchasing an NSC?

Ans: Individuals can apply for an NSC by duly filling in the NSC form at a post office.

Can individuals benefit from tax advantages for investing in NSC?

Ans: Under Section 80C of the Income Tax Act, individuals are eligible for NSC tax benefits of up to 1.5 lakh. Tax relief is also available on interest earned on investments up to Rs 1.5 lakh.

Can holders add nominee candidates to an NSC?

Ans: Yes, nomination facility is available with NSC.

Can a non-resident Indian invest in NSC?

Ans: No, any non-resident Indian cannot invest in NSC.

Q: If an individual's NSC is stolen, lost or destroyed, the person can obtain a duplicate of the certificate?

Ans: Yes, the person can get a duplicate of the certificate at a post office. In case he/she has a photocopy of the certificate, the process to get a duplicate certificate becomes very simple.

Q: What are the payment methods that can be made with the NSC?

Ans: Payments can be made by demand draft, order, cheque or cash.

Q: Where can the NSC be cashed at maturity?

Ans: The NSC can be cashed at any post office. However, the certificate and proof of identity must be submitted.

Q: Are there any eligibility criteria for investing in NSC?

Ans: NSCs can be purchased by adults. NSCs may also have co-holders or an adult may purchase an NSC on behalf of a minor.

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