Confused about investing in Post Office National Savings Certificates (NSC)? Let’s uncover the essentials of NSC, covering eligibility, benefits, interest rates, and more.
Financial literacy is often lacking in India, leading to financial struggles in the 30s or retirement. Developing an investment habit in your 20s is wise, as you can take more risks. While some schemes offer high profits with higher risks, there are also low-risk schemes with good returns. Some of these are government-backed, ensuring the security of your investments.
What is Post Office NSC?
The Post Office NSC is a government-backed savings scheme popular for its simplicity and ease of use. Introduced in the 1950s to fund national development, it has evolved into a tax-saving scheme. Its sovereign guarantee by the Government of India makes it a reliable option, often offering better returns than other postal savings schemes like Sukanya Samriddhi Yojana, NPS, and PPF.
Benefits of NSC
- Tax Benefits: Investors can claim a deduction of up to INR 1.5 Lakhs under Section 80C of the Income Tax Act, helping them save on taxes.
- Guaranteed Returns: The scheme promises the return of both principal and interest upon maturity, offering a reliable income source.
- Collateral for Loans: Banks and NBFCs accept NSC as collateral, making it easier to secure loans.
- No TDS: There is no TDS on NSC payouts, though applicable taxes will be charged.
- Nomination Facility: Investors can nominate minors or other family members to inherit the investment in case of an unfortunate event.
Drawbacks of NSC
- Premature Exit: Exiting the scheme prematurely is not allowed, except in cases of the investor’s death or a court order.
Interest Rates of NSC
The Government of India fixes the interest rate annually on April 1st. This rate remains fixed until the maturity date, unaffected by inflation or market fluctuations. Historically, the interest rate has been set slightly higher than inflation to preserve the investment’s value. For instance, the interest rate was 7.6% for the quarter from July 2018 to September 2018 and increased to 8% for the subsequent quarters.
Eligibility to Invest
All Indian residents can invest in NSC through any post office. However, companies, trusts, and Hindu Undivided Families (HUF) are not eligible. The key requirement is that the investor must be an individual Indian resident at the time of investment.
Who Benefits the Most?
NSC is ideal for Indian residents looking to save taxes while earning a steady income. It offers capital protection with guaranteed interest, making it an excellent option for those who prefer low-risk investments and want to diversify their portfolios with fixed-return schemes.
How to Invest in NSC
To start investing in NSC:
- Obtain an NSC application from your nearest post office or download it online.
- Submit the filled form with attested photocopies of your identity and address proof.
- Deposit the investment amount through cash, demand draft, or bank transfer.
Investment Limits
You can invest a minimum of INR 100, with denominations of INR 100, 500, 1000, 5000, or 10000. There is no upper limit on investment, though the tax benefit is capped at INR 1.5 Lakhs.
Types of NSC
The Indian Post offices issue two types of NSC:
- NSC Issue VIII: This has a 5-year lock-in period with annual compounding.
- NSC Issue IX: This had a 10-year lock-in period but was discontinued from December 20, 2015.
Types of NSC Account Holding
NSC can be held individually or jointly:
- Single Holder Type Certificate: For individual investors.
- Joint ‘A’ Type Certificate: For joint investments, with both holders receiving the maturity amount.
- Joint ‘B’ Type Certificate: Similar to Joint ‘A’, but only one holder receives the maturity amount.
Premature Withdrawal
Premature withdrawal is allowed under specific conditions:
- Before One Year: Only the invested amount is returned, without any interest.
- Between One to Three Years: The invested amount plus simple interest is returned.
NSC Transfer
NSC can be transferred in two ways:
- To Another Post Office: Submit a transfer application at the old or new post office.
- To Another Person: Provide written consent to the postmaster. Transfers are allowed in cases of the holder’s death, a court order, or joint holding.
Issuance of Duplicate NSC
In case of loss, damage, or misplacement, a duplicate NSC can be issued after proper verification and validation by the post office.
The Post Office National Savings Certificate scheme offers safe and better returns, making it an excellent choice for secure investments, even in smaller denominations.
