National Saving Certificate

A National Savings Certificate (NSC) is post office savings and investment plan issued in various denominations starting from Rs. 100 to Rs. 10,000. It is an investment scheme floated by the Government of India. NSC is a tax-saving bond launched to control the money supply in the economy. The government creates and introduces such schemes when it needs to decrease the money supply in the economy. There is no maximum limit on the NSC.

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Let us learn more about NSC in this article.

How Are NSC Certificates Used?

NSC certificates can be used as collateral security for a loan. They are an ideal product for investors looking for capital investment and a guaranteed product with fixed interest rates. 

This product is suitable for conservative investors because it is an entirely debt-oriented instrument with no exposure to equity. NSC is backed by the government, meaning anyone can easily avail of this product in post offices. Currently, NSC VIII is in existence. 

Who Should Invest in NSC?

Any investor looking for a safe investment plan that gives regular benefits can invest in a National Savings Certificate. NSCs offer complete protection of capital and guaranteed interest.

Unlike most income schemes like the National Pension System and tax-saving mutual funds, the certificates don't deliver inflation-beating returns. NSCs are easily accessible and can be purchased through any post office. 

Advantages of National Saving Certificate

The advantages of an NSC are as follows: 

  • Saves tax: The main advantage of the National Savings Certificate is you can save income tax under section 80C of the Income Tax Act, 1961 for investments up to Rs. 1.5 lakh every financial year. 

  • Guaranteed interest: This product is backed by the government, giving you guaranteed interest because of its low exposure to risky instruments.

  • Maturity period: It has a minimum maturity period of only five years. Bank tax-saving fixed deposit products also have a maturity period of five years. But NSCs are better than term deposits, i.e., tax-saving fixed deposit products, because of the interest rates and governmental backing. 

  • Easily available: It is readily available at all Indian post offices. Any individual can visit the post office and take a National Savings Certificate. 

  • Compounded interest: Under this scheme, interest is compounded and re-invested by default and is eligible for tax benefit under section 80C of the Income Tax Act.

  • Fixed interest rates: Interest rates are locked for five years, and there is no volatility.

  • No limit and no TDS deduction: There is no limit on the maximum investment in NSC. Also, TDS is not applicable for this investment product. If you consider bank tax-saving instruments, product tax is deducted, and the bank pays the remaining amount.

  • Transfer facility: You can transfer this NSC product from one post office to another any time before its maturity.

  • Duplicate certificate: In case of loss/theft of the NSC, a person can apply for a duplicate at the nearest post office. 

  • Individual investments: Any individual can invest in NSC. However, it is not suitable for trusts or HUFs (Hindu Undivided Family) as it is a savings scheme specifically for individual investors. 

  • Not for NRIs: NRIs cannot invest in NSC. However, if an NRI has invested in NSCs during their stay and residence in India, the investment will continue till maturity.  

  • Minors: This product/investment can be purchased for minors. It can be opened jointly or individually. 

  • Regular flow of funds: This product generates a stable flow of income, i.e., guarantees steady income.

  • Premature withdrawal: If withdrawn within one year from the investment date, only the principal value is returned to the investor.

  • Premature encashment: Premature encashment is allowed for mainly three reasons: in case of the NSC holder’s demise, if ordered by the court, and when pledged by a government officer. 

How Does NSC Compare with Other Tax-Saving Investments?

The Income Tax Act, 1961 under section 80C has many investment options that have tax-saving benefits, and NSC is one of them. Some of the other popular choices are:

  • Equity-linked saving scheme (ELSS)

  • Public Provident Fund (PPF)

  • National Pension Scheme (NPS)

  • Tax-saving fixed deposits (FD)

This is how NSCs fare when compared with these tax savings plans:

Name of investment Interest rate (%) Maturity period Term of risk
National Saving Certificate 6.8% p.a. 5 years Low risk
Equity-linked saving scheme 12% to 15% p.a. 3 years Market-related risk
Public Provident Fund 7.1 % p.a. 15 years Low risk
National Pension Scheme 8% to 10% p.a. Till retirement Market-related risk
Tax saving fixed deposits 4% to 6% p.a. 5 years Low risk

In Conclusion

The National Savings Certificate provides many benefits, but investors must invest in it based on their tax savings and tax-free income goals. If you are a conservative investor and are looking for a regular return on investment, NSCs are an excellent option. 

National Savings Certificate also has a loan facility. If an investor urgently requires funds, they can withdraw the amount from their NSC investment. It assures guaranteed returns, fixed returns, regular returns, and returns that exceed inflation. 


  • Who should invest in a National Saving Certificate?

    Any investor looking for a safe investment plan that gives regular benefits can invest in a National Savings Certificate. NSCs offer complete protection of capital and guaranteed interest. 
  • What are the benefits of the National Savings Certificate? 

    The benefits of the NSC include flexible interest rates, guaranteed interest, maturity period, savings tax, individual investments, premature encashment, premature withdrawal, compound interest, and fixed interest rates.
  • What are the tax implications and returns on NSC?

    You can save tax under section 80C of the Income Tax Act with NSC investments up to only Rs. 1.5 lakh. Currently, the NSC earns an interest rate of 8.1% with a lock-in period of 5 years, with the interest rates compounded annually.

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