National Savings Certificate (NSC)
NSC (National Savings Certificate) is the Government of India's savings scheme. It can be purchased from any post office. In NSC you can make money by getting relaxed as these investments are more secure than fixed deposits. Not only this, you can save tax by investing money in it. NSC is for everyone, whether you are salaried, businessmen or farmers, they are all available and useful for everyone. How can they be bought? How can they help Save Your Tax? How can this prove better than other existing Tax Saving Options? Let us answer all these questions.
Benefits of NSC :
Post offices and cities spread from cities to villages make the NSC easily accessible to everyone. Due to the introduction of Core Banking Service in most post offices, there has been facility of buying them anywhere and everywhere.
Minimum Investment is Rs 100 in NSC:
One good thing about NSC is also that you can invest only a hundred rupees. Just as your notes are present in the form of denominations of 100, 500, 2000, similarly NSC also receives 100, 500, 1000, 5000, 10000 certificates. According to your capacity, you can adjust the NSCs to Rs 100 or above to any limit. Yes, of course, keep in mind that tax exemptions will be available only up to NSCs of up to 1.5 lakhs.
One can buy NSC of Rs. 100 also and there is no maximum limit for investment. But you can claim deduction till maximum of Rs.1.50 lakhs only under section 80 C.
At present, only 5-year NSC is operational. In which you owe government 7.6%. Interest every six months after adding to your deposit, it grows according to the compound interest. 10 years NSC facility has been closed since December 2015. However, the people who bought the first 10 years NSC would benefit from it.
The Government has started fixing interest on the NSC in the financial year 2016-17 in every quarter. Therefore, before buying the NSC, you should confirm how much interest is available on it. The interest rate at the time of purchase will remain until the maturity period is completed. That is, there will be no change in your NSC interest rate for the next five years. The interest rate at which the NSC is purchased will be applicable till the maturity.
NSC and Tax Benefits :
On the amount invested in the form of NSC, the Government exempts tax from Section 80C under tax. But this exemption can be found only at a NSC of up to 1.5 lakh rupees during a financial year. However, the interest paid on NSC till 1.5 lakh is not tax free. The interest of the NSC is to show you the annual income tax return.
How To Purchase NSC :
As we have stated above, NSC can be purchased from any Post Office or Head Post Office. Apart from this, the banks have been allowed to sell the NSC a few days back. However, no information has been received about this from the banks.
If you have made up your mind to buy NSC or National Savings Certificates then you will be able to keep a few things in advance.
NSC -Required Documents and Payment :
Before buying the NSC, take both original and photocopy of two documents from your documents related to identity and address, such as Voter Card / PAN Card / Aadhar Card / Ration card etc.
NSC can also be purchased by giving cash and also by giving a cheque or a demand draft.. Cheque or Demand Draft will be the name of Post Master of Post Office, from where you are buying NSC. If your post office has an account, then you can also buy NSC by transferring the amount of NSC value to the NSC.
Types of National Savings Certificate :
There are 3 types of NSC’s. The Post Office provides you with the option of buying NSC in three ways.
1.Single Holder Type NSC: The certificate on the purchase of this type of NSC is the name of an individual (Adult Or Minor or). The name of the guardian is also important when the name of a minor or child is mentioned.
2.Joint A type NSC: On the purchase of this kind of NSC certificates, the name of any two adult persons is named. There can be both husband and wife, father-son, mother-daughter, two friends or partners. The money received on maturity can be shared 50% depending on the account holders.
- Joint B type NSC: This type of NSC is also the name of any two adult people. The only difference is that only one person will be eligible to receive the maturity proceeds. Who will get the proceeds has to be mentioned while filling the application form.
Companies and NRIs are Not Eligible :
No society or company can buy NSC. NRI means that the NRI does not have the facility to buy NSC.
Nomination facility :
There is also the facility of choosing nominee in the national savings letter so that your chosen person can get your NSC money if there is any untowardness with you. You can nominate any family member.
Transfer and Duplicate Certificate :
You can buy your NSC from any Post Office in the country, transfer them to any other post office, and you can also redeem your funds from there if you are mature. In such a situation, the NSC transfer certificate should be kept together at the time of redemption of the NSC.
If the NSC is lost or damaged, you can also make a duplicate NSC by proving your identity.
To redeem the NSC, you have to complete the following process:
Take the NSC's original certificate together. Keep original documents that prove your identity as well.
The NSC redemption form needs to be filled. Now this form is also available on the Indian post's website www.indiapost.gov.in. One can download and submit it also.
If the person redeeming is a minor, it is necessary for the guardian to sign besides his signature, being adult. In order to prove his identity on the absence of the guardian, such person should sign who knows the post master.
In the event of the death of NSC holder, his nominee has to submit two types of forms and fill them.
Annexure 1: This form is for redemption of NSC, where your name is registered as nominee.
Annexure 2: This form is meant to certify the succession of nominee.
Procurement of before / accidental payment of maturity
National savings letter can be redeemed before maturity. This facility will be available in just two situations.
Condition-1: The NSC has completed three years.
Condition-2: Once the NSC holder dies, the nominee has to pay it at any time.
NSC and Loan facility :
You can also take loans from the bank and the financial institution by placing the NSC in the form of an emergency. Yes, determining the amount of loan and the interest on it will depend on the institution which is giving you the loan. Some banks, on the three-year old NSC, provide loans up to 85 percent to 90 percent of the face value. Less quantity of loan is available for this.
After Maturity of NSC :
If you do not redeem the NSC after maturity, then it will not automatically renew for the next period. In the later period, it will get interest like general savings account only. That too only for the next two years.
If you want to reinvest it, you can do it, but you will have to apply for it, and the new interest rate on the new investment will not be the same.
NSC vs PPF: A short Camparison :
Both the Public Provident Fund and the National Savings Certificate are considered to be better tax saving investments. Both are the saving scheme of the Government of India. The government takes guarantee of the money deposited in both. Interest in both are equally or nearly identical. In spite of this, how does the NSC proves to be better option for you, let us know.
Difference in Investment limit :
In NSC, you can invest up to a maximum of 100 rupees to any limit. PPF can be invested at least 500 rupees and maximum Rs 1.5 lakh during a financial year.
The limit of tax free investment in both NSC and PPF is only 1.5 lakhs. The maximum investment limit in PPF is Rs 1.5 lakh, so there is no question of tax. On investing more than 1.5 lakhs in the NSC, the income on additional investment will be taxed.
Difference in Investment Period :
NSCs can now be bought for a maximum of 5 years only, while the PPF is deposited for 15 years. Actually, the NSC is a type of product, which can be bought at any time. PPF is a type of account, in which money is deposited in your name. Normally you deposit money in it every month. It can not deposit more than 12 times a year and more than Rs 1.5 lakh in total.
Difference in Investment Return :
At present, the same interest rate in both schemes is 7.6 percent. That is, the returns are the same, but where interest on the NSC is taxable, the PPF interest is tax free. So if your income falls within the tax, PPF earnings will be more beneficial because there will be no tax on this.
I have already written a post on Public Provident Fund (PPF).
National Savings Certificate is one of the secured schemes of investment started by the Government of India. It is one of the traditional means and very popular among the rural population. This is one of the best schemes introduced by the Government.