What is a National Savings Certificate (NSC)?

Sandeep Kumar works as the senior manager with a private bank. Due to his work in the banking sector, he has gained a good knowledge of the various savings products and their returns, which he suggests to his friends regularly. With a family to support and aging parents to care for, Sandeep has parked most of his investments in fixed income instruments, like National Savings Certificate, Post office savings scheme, savings account, etc., His investments in NSC are relatively high primarily because of its low risk and assured returns. He has invested in multiple NSC schemes for various investment goals, of which the NSC taken for children’s education came to maturity recently. At the same time, he lost his job due to the COVID-19 pandemic, which shocked him. But he managed the expenses and paid for his kid’s education with the maturity amount from NSC. Due to proper planning, Sandeep was able to tide over the financial crisis without any trouble. He has joined another major bank at a senior level and continues investing in national savings certificate plans.

There are many options available when it comes to investing in the long term. It all depends on the individual’s earning capacity and the purpose of their savings based on which the choice can be taken as per the financial targets. Among the top investment products, the National Savings Certificate (NSC) is a popular option chosen by many because of the low risk associated with it. Now, let us go deeper to know more about NSC in detail. 

What is a National Savings Certificate? 

This is a new word for newbies, and the first question they want to ask is, “What is NSC? It is a fixed-income investment scheme that can be opened with any post office in India. An initiative of the Government of India, this scheme allows individuals to invest money in the savings bond, which encourages the small and medium-income investors to park their funds and also save income tax. 

The national savings certificate interest rate is fixed at 6.8 percent per annum, which is revised regularly by the government. Due to the low risk involved in the product, NSC is quite popular among the masses, which is why it is available at the nearest post office. The maturity period of NSC is fixed at five years, and there is no limit on the maximum amount that can be an investment in this scheme. However, for income tax savings, investments up to Rs.1.5 lakh shall only be considered for the tax deduction, according to section 80C of the Income Tax Act. 

Features of NSC

 The NSC scheme is promoted as a savings avenue for individuals, and hence, Hindu undivided families (HUF) or trusts cannot invest in them. Moreover, it is not open for non-resident Indians to invest in them as well. Below are some of the salient features of NSC that will help you better understand the scheme. 

• Fixed Return: The NSC interest rate of 6.8% is guaranteed and doesn’t fluctuate like in the case of other market-linked investments. 
• Tax Savings:  National savings certificates provide significant income tax benefits for individuals. You can claim up to Rs 1.5 lakhs in income tax by investing in NSC as per the provisions of section 80C of the Income Tax Act, 1961.
• Investment Amount: The biggest advantage of investing in NSC is the possibility to invest small amounts, starting from Rs 1,000 (or multiples of Rs 100). This enables small investors also to make use of the scheme compared to other schemes, where the initial investments are huge. At the same time, there is no maximum limit on investments.
• Interest Rate: The NSC interest rate 2021 is 6.8% per annum, which the government of India fixes. The government constantly reviewed the interest rate and will be informed if there is any change. 
• Maturity Period: The maturity of the NSC scheme comes in two time periods – 5 years and 10 years. Depending on the scheme chosen, the maturity period changes. Before investing, it is recommended to inquire with the respective post offices about the plan and tenure available with them, as some post offices do not offer schemes with a 10-year term. 
• Easy Accessibility: The post office NSC scheme can be taken from any post office in India by submitting a few KYC documents, making it very easy for individuals to buy without any complications. 
• Nomination: Investors may appoint family members (including minors) to inherit them in the event of the investor’s death.
• Loans: Banks offer loans against NSC up to the investment limit, which can be helpful to tide over your financial crisis.
• Early Withdrawal: NSC has a tenure of 5 years, and early withdrawal is not possible, but it is allowed under certain adverse cases such as the death of an investor, court decision, etc.,

How to buy NSC?  

Investing in a national savings certificate is very easy. Here are the steps involved in buying NSC: 

• Visit any of the nearest post offices and submit the completely filled-in National savings certificate application form.
• Attach the self-certified copies of necessary documents to the application form and produce the originals at the time of verification. 
• Choose the desired amount to invest and complete the payment by way of cash, cheque, demand draft, etc., 
• On successfully submitting the application form, you shall receive a confirmation for NSC account opening along with the required credentials.

The national savings certificate offers guaranteed growth and complete protection of your investment capital. Compared to other income schemes such as tax-saving mutual funds, stock markets, bonds, and government pension funds that may not provide assured returns, NSC is one of the safest options available. From the features listed above, it is clear that anybody who is looking for a safe way to invest their hard-earned money and get steady or assured interest along with income tax benefits can choose to invest in NSC.