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RBI as an inflation control measure has reduced the repo rates and this led the government to revise the NSC interest rate.
Recently, the NSC interest rate has been slashed by 110 bps for Apr to June quarter thereby reducing the interest rate from 7.9% to 6.8%.
Despite these measures, National Savings schemes or NSCs have retained their popularity as an evergreen product majorly among the small or middle-order income groups due to the low investment amount, guaranteed interest rate with the added benefit of tax savings.
What is National Savings Certificate?
A national saving Certificate is a saving bond introduced by Govt. of India to inculcate the habit of saving among the masses.
The government of India through the branches of India Post issues NSCs.
How to compute NSC Interest Rate?
Let us try to understand the calculation with the help of a simple example:
Let us learn how to calculate the NSC interest rate with the help of an example. Consider the following:
Invested amount – ₹10,000
Date of deposit- 1st July 2021
Interest rate – 6.8% per annum
Lock-in Period – 5 years
| Principal Amount | NSC Interest Paid | Accrued Interest | Aggregate Amount |
| Year I | Rs. 680/- | Rs. 680/- | Rs. 10,680/- |
| Year II | Rs. 726/- | Rs. 1,406/- | Rs. 11,406/- |
| Year III | Rs. 776/- | Rs. 2,182/- | Rs. 12,182/- |
| Year IV | Rs. 828/- | Rs 3,010/- | Rs. 13,010/- |
| Year V | Rs. 885/- | Rs. 3,895/- | Rs. 13,895/- |
Features And Advantages of NSC
- Tax Benefit– You can avail of tax benefits up to Rs. 1.5 Lacs under Sec 80 C of Income Tax Act on NSC investment. You can avail of the tax benefit on NSC interest paid for 4 years as the interest paid each year is reinvested until it pays on maturity at the end of the fifth year.
- Secured Investment – Govt. of India backs NSC scheme and hence the risk is low and hedged against the market risks.
- Convenience to invest in NSC- NSC investment can be started with an amount as low as Rs. 1000/- and thereby in multiples of Rs. 100/- without any upper ceiling.
- Guaranteed Returns– NSC interest rate remains fixed throughout the tenure of five years of investment.
- Transferability– You have the facility to get your NSC investment transferred to your nearest Post Office of your choice enhancing your accessibility and convenience merely by filing form NC 32.
- Accessibility– With the widespread network of Post Offices even in the most interior part of the country, it has become all the more approachable.
- The Easy Facility of Loans– NSCs are easy to be pledged as security to avail loan in case of any emergency at a nominal premium over the NSC interest rate paid to the investor.
- Start Small– You can start investing in NSC with a minimum amount as low as Rs. 1000/- and thereby in multiples of Rs. 100/-. Further, there is no upper ceiling as well.
- Maturity Term- NSCs investments mature after 5 years.
- The Factor of Compounding– NSC interest paid is compounded annually to give your investment the compounding booster.
- Nomination– You have to facility to avail nomination in your NSC scheme so that in case of any unfortunate incident, your family members can inherit the deposit.
- Tax Deducted At Source(TDS)- Upon maturity of NSC scheme, the investor is paid the full amount without any tax deductions. The Tax, if any application is to be paid separately by the investor at the time of filing Income Tax Returns.
NSC Interest Rates
NSCs offer an attractive rate of interest rate of 6.8% p.a . (the ROI in the NSC scheme is reviewed by GOI quarterly) compounded annually.
The NSC interest rate applicable at the time of deposit remains the same throughout the tenure of the scheme unlike the Public Provident Fund(PPF) or Sukanya Samridhhi Yojna(SSA) where it gets revised every quarter.
Who is Eligible to invest in NSC?
- Any Resident Indian in the case of the single account holder.
- One or more individuals in case of joint accounts (maximum up to 3 ).
- Any guardian on behalf of a minor or on behalf of a person with an unsound mind.
- A minor who is above the age of 10 years can individually open the account.
Exceptions
As the purpose of the NSC scheme is growing personal savings, the following entities are not eligible to invest-
- Hindu Undivided Family(HUFs)
- Non-Resident Indians(NRIs)
- Trusts
- Society
Documentation Required For NSC scheme
- Account Opening form
- KYC Form(applicable in case of New customers / for updating in case of change in KYC)
- PAN Card
- Aadhar Card/Passport/Driving Licence/ Voter’s ID card
- Job Card issued by MNREGA/Letter issued by National Population Register mentioning name and address
- Proof of Date of Birth /Birth Certificate in case of a minor
Loan Facility
You can pledge your NSC certificate to
- The President of India/Governor of the State
- RBI/Scheduled Bank/ Co-operative Society/Co-operative Bank
- Corporation Bank(public/private)/Govt Company/Local Authority
- Housing Finance Company
Maturity Period And Premature Withdrawal Of NSC
NSC is invested for 5 years from the date of deposit. The facility of premature closure is not available before the expiry of 5 years with the under noted exceptions.
- In the event of death of the account holder in case of a single account or one of the account holders in case of a joint account.
- On forfeiture by a pledgee being a Gazetted Officer
- By any Court’s directive
- Specified authority recalls the debt availed against NSC.
How To Buy NSC
With Cash, Cheque, or Demand Draft, NSCs can easily be purchased from your nearest post office.
The issue of Certificates has been discontinued w.e.f July 2016. Now you can easily purchase NSCs through the electronic mode or Passbook mode.
- Purchasing Through e-mode– If you also maintain your Savings account with Post Office and have an internet banking facility in the account, you can hold NSC in e-mode similar to e-RD or e-FD.
- Purchasing through the Passbook mode– If you are not tech savvy or confident in investing through e-mode, you can approach any branch of the Post Office to issue the certificate via a passbook or in printed e-mode format.
You can get the passbooks updated manually at the Post Office duly authenticated with the signature of the official or even get it replaced with an electronic form. You can easily access your electronic format of the certificate through an online banking facility in your Post Office Savings account.
Frequently Asked Questions(FAQ)
Q1. How many accounts can be opened under NSC?
Any number of accounts can be opened under the scheme.
Q2. What are the charges for premature withdrawal?
Normally, pre-mature withdrawal is not permissible. But if allowed under the certain conditions like the death of the depositor or its forfeiture, the interest payable is as below:
- If the deposit is withdrawn before a term of 1 year
-No interest is paid only the invested amount is liable to be paid.
- If the deposit is withdrawn after 1 year
-The invested corpus along with the interest for the invested tenure is paid.
Q3. Can NSCs be encashed at a Non-home branch?
Yes, NSCs can easily be encashed at any branch of the Post Office irrespective of the branch of the initial deposit.
In case of loss of the NSC certificate, can I get a duplicate certificate?
In case you have a copy of the NSC issued, you can get a duplicate certificate very easily.
But, if in case no copy is available, please follow the process below:
1. Submit the application form to the post office from where the certificate was issued.
2. Submit through an application your details such as name, amount, NSC certificate number, and date of the issue giving proper reasons for the issue of a duplicate certificate.
3. Submit an indemnity bond along with sureties or a Bank guarantee.
4. Deposit the fee as prescribed under the governing rules and regulations.
Q4. Can you buy NSC scheme online?
Though the facility to buying NSC online by investing through internet banking is yet not available, you can maintain these accounts in electronic form.
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