What is NSC: As an inflation control measure, the Reserve Bank of India (RBI) has lowered the repo rates, prompting the government to adjust the NSC interest rate.
Recently, the NSC interest rate for the April to June quarter was reduced by 110 basis points, bringing the rate down from 7.9% to 6.6%.
Despite these measures, National Savings Schemes (NSCs) have maintained their popularity as an evergreen product, particularly among low- and middle-income earners, due to the low investment amount, guaranteed interest rate, and tax savings benefit.
What are National Savings Certificates?
The national saving certificate is a savings bond introduced by the government of India in an effort to inculcate the habit of saving among the general population.
The Indian government issues NSCs through India Post branches.
How to Determine the NSC Interest Rate?Let’s attempt to comprehend the calculation using a basic example.
Let’s use an example to learn how to calculate the NSC interest rate. Consider the subsequent:
- Amount invested – 10,000
- The date of deposit is July 1, 2021.
- Annual interest rate – 6.8%
- 5 years of exclusivity
Characteristics And Benefits of the NSC Tax Benefit
As the interest paid each year is reinvested until maturity at the end of the fifth year, you are eligible for the tax deduction on NSC interest paid for four years.
- Secure Investment – The Indian government backs the NSC scheme, so the risk is low and hedged against market risks.
- NSC investments can be initiated with as little as Rs. 1,000, and thereafter in multiples of Rs. 100, without a cap.
- Guaranteed Returns – The NSC interest rate is fixed for the entire five-year investing period.
- Transferability – By filing form NC 32, you can have your NSC investment transferred to the Post Office of your option closest to you, thereby enhancing your accessibility and convenience.
- Accessibility – With a vast network of Post Offices even in the most remote regions of the country, it has become considerably more accessible.
- The Ease of Obtaining Loans – NSCs can be pledged as collateral for emergency loans at a nominal premium over the NSC interest rate paid to the investor.
- Start Small – You can begin investing in NSCs with a minimum of Rs. 1000/- and subsequently in multiples of Rs. In addition, there is no upper limit.
- Term to Maturity: NSC investments mature after five years.
- The Factor of Compounding – The annual compounding of NSC interest gives your investment a compounding boost.
- Nomination– You have the option to designate a beneficiary in your NSC plan so that in the event of a misfortune, your family can inherit the deposit.
- Tax Deducted At Source (TDS) – Upon maturity of the NSC scheme, the complete amount is paid to the investor with no tax deducted. The Tax, if applicable, must be paid separately by the investor when filing their income tax returns.
Interest Rates for NSC
NSCs offer a competitive interest rate of 6.8% p.a. (the ROI in the NSC scheme is reviewed quarterly by the GOI) compounded annually.
In contrast to the Public Provident Fund (PPF) and Sukanya Samriddhi Yojana (SSA), where the interest rate is revised every quarter, the NSC interest rate applicable at the time of deposit is fixed for the duration of the scheme.
Who is Eligible for NSC Investment?
For a single account holder, any resident Indian is eligible.
One or more individuals (up to a maximum of three) in the case of joint accounts.
Any guardian on behalf of a juvenile or a person with impaired mental capacity.
A minor older than 10 years old can establish the account independently.
Exceptions
- As the NSC scheme is intended to increase personal savings, the following entities are ineligible to invest:
- HUFs (Hindu Undivided Family)
- NRIs are non-resident Indians.
- Trusts
- Society
- Required Documentation for NSC Scheme Account Opening
- KYC Form (applicable for New Customers / for Updating Existing Customers)
- PAN Card
- Aadhar Card/Passport/Driving License/Voter Identification Card
- Job Card issued by MNREGA/Letter issued by the National Population Register containing the applicant’s name and address.
- In the case of a minor, proof of birth date/birth certificate is required.
Credit Facility
You can pledge your NSC certificate to a third party.
The President of India and State Governor
RBI/Schedule Bank/Co-op Society/Co-op Bank
Corporation Bank(public/private)/Government Agency/Local Government
Housing Finance Firm
Maturity Period And Early NSC Withdrawal
NSCs are invested for a period of five years from the date of deposit. With the exceptions listed below, the facility of premature closure is not available prior to the expiration of five years.
In the event of the demise of the account holder for a single account or one account holder for a joint account.
In the event of default by a pledgee who is a Gazetted Officer
By any Court’s command
The debt secured against NSC is retracted by the authority specified.
How To Buy NSC
NSCs can be purchased with Cash, Check or Demand Draught at the nearest post office.
Certificates are no longer being issued as of July 2016. You can now simply purchase NSCs via the electronic or Passbook methods.
You can hold NSC in e-mode, analogous to e-RD and e-FD, if you also maintain a savings account with the Post Office and have internet banking capabilities in the account.
Purchasing through the Passbook mode – If you are not tech-savvy or confident in investing through e-mode, you can approach any Post Office branch to issue the certificate via a passbook or in printed e-mode format.
Passbooks can be updated manually at the Post Office and authenticated with an official’s signature, or they can be substituted with an electronic form. You can readily access the electronic version of the certificate through your Post Office Savings account’s online banking feature.
FAQ — Frequently Asked Questions
How many accounts are permitted under the NSC?
Under the scheme, an unlimited number of accounts can be created.
What are the penalties for early withdrawal?
Typically, premature withdrawal is prohibited. However, if permitted under certain conditions, such as the depositor’s demise or its forfeiture, the interest payable is as follows:
If the deposit is withdrawn before the one-year term, a penalty will be assessed. -No interest is paid; only the principal amount must be repaid.
If the deposit is retracted after one year -The invested capital, along with the accrued interest, is returned.
Are NSCs redeemable at non-home branches?
Yes, NSCs can be readily cashed at any Post Office location, regardless of where the initial deposit was made.
Can I obtain a duplicate NSC certificate if I lose my original?
If you have a copy of the issued NSC, you can simply obtain a duplicate certificate.
If no copy is available, however, please follow the steps below:
Submit the application form to the post office that originally issued the certificate.
2. Include valid reasons for the issuance of a duplicate certificate along with your name, quantity, NSC certificate number, and date of issuance on a duplicate certificate application.
3. Provide an indemnity warrant in addition to sureties or a bank guarantee.
4. Deposit the fee in accordance with the applicable rules and regulations.
Can NSC scheme be purchased online?
Although the ability to invest in NSCs online via internet banking is not yet available, these accounts can be maintained electronically.
