National Savings Certificate (NSC): Interest Rate 2024 & Tax Saving Benefits
Updated: Oct 1
National Savings Certificates (NSC) are one of the oldest investment schemes supported by the Indian government. They provide a safe way to invest and encourage people to save money. NSCs are great for anyone wanting to make a small investment with guaranteed returns and can help you save on taxes up to ₹1.5 lakh under Section 80C of the Income Tax Act.
Before we explore the details like the different types of certificates, how to nominate someone, and how to withdraw or transfer your investment we will first look at how NSCs earn returns, their tax rules, and the benefits of investing in them. This guide is a helpful resource for anyone interested in NSCs.
Table of Contents
What is National Savings Certificate?
A National Savings Certificate, or NSC is a government savings bond a helpful for small investments and tax breaks. NSCs were introduced in the 1950s to aid in nation-building. Any Indian resident can obtain these certificates from any post office in the country. It is a fixed-return, low-risk government initiative. Those that want to grow their base through a fixed return programme or investors who are hesitant to take risks typically favour this.
You can open a joint account with another adult, invest in NSC in your name, or invest in it for a minor from the closest post office. The five-year NSC has a set maturity time. The Income Tax Act's section 80C allows for a tax discount on deposits up to Rs 1.5 lakhs made in National Savings Certificates (NSCs), while there is no maximum limit on NSC investments. The minimum investment in them is Rs 1,000, with an interest rate of 7.7% for a lock-in period of 5 years.
Who Should Invest in National Saving Certificate?
Like other fixed-income products such as Public Provident Funds and Post Office FDs, the NSC guarantees interest and provides total capital protection. However, unlike tax-saving mutual funds and national pension systems, they are unable to produce returns that outpace inflation. In essence, the National Savings Certificate is a savings plan that the government has pushed for Indian individuals. The list of NSC eligibility requirements that must be met to invest in NSCs is as follows:
Private and public limited businesses, trusts, and Hindu Undivided Families (HUFs) are not permitted to invest in NSC.
The person should be a citizen of India. It is not possible for non-resident Indians (NRIs) to invest in NSC.
There is no minimum age requirement for anyone to acquire a certificate.
Features of National Savings Certificate
Fixes Income The National Savings Certificate offers fixed returns assured for the duration of the certificate. This scheme's interest rate is not affected by changes in the market. For the specified period, NSC returns are often higher than FD returns.
Interest Rate Every quarter, the Indian government determines and modifies the interest rate on National Savings Certificates. As of October 10, 2023, the interest rate is 7.7% per annum. After five years, the accrued interest is reinvested and paid.
Minimum and Maximum Amount You can fund an NSC with as little as Rs. 1,000 as a minimum deposit and then add multiples of Rs. 100 thereafter. Neither a maximum amount nor a maximum number of deposits are restricted.
Premature Withdrawal Funds cannot be prematurely withdrawn from NSC investments. You can only withdraw the money you invested in this plan after the lock-in period has ended. However, the post office may allow your request for an early withdrawal under special circumstances, such as the passing of an investor or a court order.
Types of NSCs
There used to be two different kinds of National Savings Certificates: NSC VIII Issue and NSC IX Issue. Nevertheless, the latter was stopped by the Indian government in December 2015. At present, these are classified as follows:
Tax Saver The National Savings Certificate is an initiative supported by the government. Therefore, under Section 80C of the Income Tax Act, you can deduct up to Rs. 1.5 lakh in taxes for investing here.
Maturity Amount You will get the whole maturity amount after your investment period. Regarding NSC returns, there are no TDS fees. You would, however, be responsible for paying the relevant tax on the amount as an investment.
Benefits of National Savings Certificate
Accessibility
By bringing your documentation to any post office or bank that has been approved, you can invest in a National Savings Certificate with ease. You can finish the simple application procedure online by supplying a few KYC papers. Additionally, moving your NSC account from one post office to another is a convenient option. When necessary, you can easily transfer ownership of this certificate from yourself to another individual.
Feasibility
With a National Savings Certificate, you can begin investing with as little as Rs. 1,000. The government has not established a maximum amount for this programme. You don't have to worry about anything when you invest as much money as you like, depending on your convenience, risk tolerance, and budget.
Loan Collateral
If an investor chooses a secured loan, the majority of banks and NBFCs accept NSC certificates as security deposits or as collateral. In these cases, the bank or NBFC that will be disbursing the loan transfers this certificate to the bank or post office and attaches a transfer stamp to it.
Facility for Nomination
Any family member, regardless of age, may be nominated by an investor to receive the scheme's profits upon maturity. If an investor passes away from a chronic disease, their family will benefit greatly from this facility.
Tax Benefit
The NSC Investment has no upper limit, as you are already aware. Section 80C of the Income
Tax Act, however, only allows tax deductions on investments up to Rs. 1.5 lakhs. For the first four years of investment, there is no tax liability, unlike with several alternative tax-saving options. For the first four years of your NSC investment, any interest you earn is seen as money that you have put back into your original investment. It therefore qualifies for tax benefits as long as it is less than the Rs. 1.5 lakh ceiling. Because of this, the interest you will receive in the fifth year will not be invested again. The tax that applies to this will be based on your appropriate tax slab.
How Should You Invest in National Savings Certificate?
Previously, actual copies of NSC certificates may be purchased to participate in the National Savings Certificate programme. But in 2016, this practice was abandoned. These days, passbooks or electronic versions of the certificates are available for purchase. The passbook method of NSC investment is laborious and time-consuming. Alternatively, you can use an authorised bank or any nearby post office savings account to invest in this initiative. You must make sure that your savings account has access to Internet banking to buy NSC certificates using e-mode.
1. Steps to Invest in National Savings Certificate Offline
Get the NSC application form from any post office or online.
Complete the form by entering all the information.
Send the form and copies of the necessary KYC paperwork that have been self-attested.
Pay the desired amount of investment and provide the original documentation for validation.
Get your application's NSC after it has been approved.
2. Steps to Invest in National Savings Certificate Online
Go to the Department of Posts' (DOP) online banking account and sign in.
Choose 'Service Requests' under 'General Services'.
Choose "NSC Account - Open an NSC Account (For NSC)" after clicking on "New Requests."
Select the debit account that is connected to the PO savings account and enter the amount of the deposit.
To review the terms and conditions, select "Click Here." After they're finished, accept them.
Click "Submit" after entering the transaction password.
You may view and download the deposit receipt from there.
Log in and select 'Accounts' to see your NSC account details.
How to Buy a National Savings Certificate from the Post Office?
NSC purchases were previously made only through the Indian Postal Service. The steps involved are as follows:
Pick up an NSC application form (Form-1) at the closest post office branch, and fill it out with your personal details and the amount you wish to invest.
Enclose the necessary supporting documentation: a current photo, identification proof, and proof of address (rental agreements for residential proof, voter ID, Aadhaar cards, PAN cards, and driver's licence).
Make the required deposit (you can choose a beneficiary and deposit with cash, cheque or demand draft).
Gather and review the issued NSC to make sure it is free of errors.
Documents Required to Obtain National Savings Certificate
In order to purchase a National Savings Certificate at a post office, the following paperwork needs to be submitted:
Recent passport-size photograph
Photo identification proof such as a driver's licence, passport, PAN, senior citizen ID, or any other identity document issued by the government
Bank statements, phone bills, passports, and power bills are examples of address proof
National Savings Certificate & Other Tax-Saving Investments- A Comparison
Section 80C of the Income Tax Act of 1961 lists NSC as one of the tax-saving investment choices. The National Pension System (NPS), Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), and Tax-Saving Fixed Deposits (FD) are among the other well-liked options. NSC is contrasted with other tax-saving options in the following table:
Taxability of Interest & Withdrawal on National Savings Certificate
NSC investments have no set limitation, but under Section 80C of the Income Tax Act of 1961, only investments up to Rs. 1.5 lakh a year are eligible for a tax refund. In addition, the interest on the certificates is tax deductible and reinvested in the original investment. Interest on NSC is deemed to be reinvested for the first four years, which qualifies it for a tax credit up to the total yearly cap of Rs. 1.5 lakh. However, since the interest is not reinvested in the fifth year, it is taxed at the investor's applicable slab rate. Generally speaking, National Savings Certificate investments cannot be prematurely withdrawn before maturity. Nonetheless, certain situations permit early withdrawal. These include:
Should the court grant permission for the money to be withdrawn
In the unfortunate event of the certificate holder's untimely death
The holder's certificate being forfeited
Request for a Duplicate National Savings Certificate
If your original NSC certificate is misplaced, stolen, destroyed, damaged, or altered, you can get a copy. It requires you to follow a process whereby you need to fill out the Duplicate Savings Certificates form. Next, you have to send it back to the post office that issued the original NSC. The essential fields on the form are as follows:
NSC issue, serial numbers, denominations, and other details related to the certificate(s).
The certificates' purchase date.
It is necessary to specify the reason for requesting a duplicate certificate in addition to any other information.
Forms Required for National Savings Certificate
Form 1: Application Form for Post Offices
This form must be filled out to purchase an NSC from the post office. It is a two-page form that must be completed with pertinent data on the investment amount, the buyer's identity, and disclosure if the NSC is being bought on behalf of a minor. Enter the relevant information in the designated field and provide a witness's and the nominee's signature. The next page is for official use and is not relevant to us; the acknowledgment receipt is located at the bottom of the form.
Form 2: Nomination Form
If you did not designate a nominee at the time of purchase, you have the option to do so at a later date using this form. All you need is the nominee's identification, residential details, and the required documentation. If you would like to designate a minor, their information will be provided in the same format as the guardian's information (if needed). Provide the specifics of the certificate you purchased for which the nomination procedure is being conducted after you have completed all the required information. It will take your signatures to finish the process. If you are unable to do so for any reason, the officials will collect your thumb impression and the signature of a witness who is familiar with the Post office.
Form 3: Change of Nomination Form
If you decide to modify the nomination later on, this form is utilised. Together with the comprehensive details of the National Savings Certificate that was obtained, the form also needs information about the new nominee. This form must be filed at the same post office where the original NSC was purchased, and it will need a witness from the post office.
Loan against National Savings Certificate
Under certain important terms and conditions, you might be able to get a loan against your National Savings Certificate investments. These are as follows:
Only Indian residents are eligible to apply for a loan against their NSC. Currently, this facility is offered by a few prestigious commercial and state banks.
The loan tenure is equal to the residual maturity (time remaining until maturity) of the NSC used as collateral.
The margin applicable to the loan against NSC depends on the time remaining until maturity.
The interest rate offered on NSC investment varies based on the individual loan applicant as well as the bank offering the loan.
Margin, interest rate, term, etc., tend to differ from lender to lender.
NSC Interest Rate History
The interest rates for the National Savings Certificate (NSC) are periodically reviewed and updated by the Ministry of Finance. Interest on the NSC is accrued annually and paid out upon maturity of the certificate.
Below is a table showing the interest rates for NSC over recent years, allowing you to observe how the rates have changed and providing insight into potential future expectations if you decide to invest.
Financial Year | Months | Interest Rate |
2023-24 | April - June | 7.7% |
2022-23 | July - September | 6.8% |
2021-22 | October - December | 6.8% |
2020-21 | January - March | 6.8% |
How to Apply for NSC Online
Open the Department of Post Net Banking website and log in to your account.
Under the "General Services" option, select "Service Requests."
Click on the "New Request" option and choose the NSC account.
Enter the deposit amount and select the debit account linked to your Post Office savings account.
Click on the link to read the terms and conditions.
Enter your transaction password and click the "Submit" button.
A deposit receipt will appear on the screen; download it for your records.
Log in again and click on the "Accounts" option to view the details of your NSC account.
Conclusion
Now that you know all about National Savings Certificates, you can go ahead and invest in them confidently. If you still have doubts and queries, you can consult an expert for further guidance and informed decision-making.
FAQ
Q1. Is NSC interest taxable?
NSC Interest is subject to taxation under "Income from Other Sources". However, interest is reinvested over the first four years and can be deducted under Section 80C. Please take note that the interest for the fifth year will be taxable based on the applicable income tax bracket.
Q2. What is the National Savings Certificate interest rate?
The interest rate for the National Savings Certificate is 7.7%.
Q3. What is the maturity period of the National Savings Certificate?
The maturity period of NSCs is five years. Only in the event of an investor's untimely death or if a court order is issued in that regard may an NSC be cashed before its maturity date.
Q4. How can I withdraw NSC after maturity?
Visit the post office that is closest to you and turn in a handwritten maturity claim together with the identity slip you received while making the purchase, the original NSC, and evidence of identity. The identity slip must be present for processing and payment to be completed right away.
Q5. When can you withdraw prematurely?
NSC-VIII has a five-year lock-in term, and early withdrawal is only allowed under certain circumstances, like:
Upon the death of the NSC holder
Upon forfeiture by a government officer listed in the gazette as the pledgee
Regarding the court's order for the NSC to withdraw prematurely
Q6. How to show NSC interest in income tax?
The NSC interest earned can be shown on your income tax return (ITR) under the heading "Income from Other Sources." Nonetheless, NSC interest is refundable under Section 80C of the Income Tax Act since it is reinvested throughout the first four years. The interest for the fifth year, or the final year, is taxable based on your income tax slab.
Q7. How to check the NSC certificate online?
For the NSC account, you must choose the online passbook service and notify the Post Office branch of your decision. You will receive the necessary internet banking credentials from the executives. After that, you may access your NSC account and see every transaction detail by logging in. Only a few Post Office branches have access to this facility.
Q8. Is NSC better than FD?
The best option for an investor will depend on your risk tolerance, financial objectives, and investing ambitions National Savings Certificate. While FDs are insured by DICGC, the profits on NSC investments are guaranteed by the Indian government. In addition, NSC offers somewhat greater interest rates than FDs with comparable terms. Premature withdrawal is not permitted, though.
Q9. What is NSC?
The National Savings Certificate (NSC) is a government-backed savings scheme in India, offering a safe and reliable investment option. It is particularly beneficial for individuals with small to medium incomes looking to save money while enjoying tax benefits. NSC is considered a low-risk investment that provides attractive returns on savings.
Q10. Under which section does NSC fall?
Investments in NSC qualify for deductions under Section 80C of the Income Tax Act, 1961. This allows you to save on your taxable income while accumulating savings through the scheme.
Q11. What is the minimum investment amount for NSC?
To open an NSC account, a minimum investment of Rs. 1,000 is required. You can invest additional amounts in multiples of Rs. 100. There is no upper limit on the total amount you can deposit.
Q12. What are the tax advantages of NSC?
With NSC, you can claim tax deductions of up to Rs. 1.5 lakh under Section 80C. Additionally, the interest accrued annually is reinvested and treated as a fresh investment for tax purposes. There is no Tax Deducted at Source (TDS) on NSC investments; however, the interest earned is subject to taxation in the financial year it is accrued.
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