National Savings Certificate (NSC) is a tax-saving investment scheme proposed by the government of India which is directed towards low to mid income depositors.
In this article, you will get to learn about all the significant information and key-points related to the National Savings Certificate, as well as directions for rightly using the NSC Calculator.
NSC Full Form – National Savings Certificate
The Indian Postal Services offers a safe and highly efficient savings plan known as National Savings Certificate or NSC as a part of its postal savings system to secure one’s savings and to also earn a considerable benefit over it.
Along with that, NSC is especially designed to generate great tax benefits and is a widely known and adapted scheme amongst government and private employees, businessmen etc across the country as it is a low-risk bond ensuring guaranteed returns to its investors.
The National Savings Certificate scheme is advantageous for those looking out for making risk-reluctant investments. Such schemes assist in strengthening the future financial stability of an individual while not affecting their current pockets because of its small savings feature.
NSC Certificate Calculator Features
There are multiple features of a National Savings Certificate which make it rank amongst the most acquired investment plans across the country. These characteristics are –
- Interest Rate – The government provides an annual interest rate of nearly 7.6%. However, it keeps revising the rate of interest every quarter which at present is 6.8% as per April, 2020.
- Easy Availability – An individual who wishes to acquire a NSC certificate can simply do it by visiting the nearest post office with required address and identity proof documents.
- Loan Collateral – If an owner of NSC wishes to obtain a loan, the NSC bond can be kept as a security document with Banks and NBFCs. However, for transferring the account to the bank, it is necessary to get a transfer stamp from the postmaster.
- Nominee Service – NSC account allows the permission of assigning a nominee under it. A Nominee can make a claim on the returns in case of death of the holder.
- Provision of Withdrawal – Apart from the circumstance (requires orders from the court) of a severe disease or an unfortunate demise of an investor, it is not allowed to make premature withdrawals before maturity of the bond.
- Alternatives – NSC earlier offered two alternatives under it: NSC VIII as the 5 year old investment plan and NSC IX as the 10 year old investment plan. However, NSC IX issue was ceased in December 2015.
- Tax Rebate – Although, there are no maximum limits of investment under National Savings Calculation, but the tax benefit under the Indian Income Tax Act, 1961, Section 80C can only be availed up to a limit of 1.5 Lakhs.
- Transferability – It is permitted only once to transfer the NSC from one individual to another from its commencement till the maturity date.
Also Read: What is Provident Fund?
NSC Certificate Benefits
- It is a highly secure and dependable source of investment, offering guaranteed returns.
- An investor can find out the accurate principal amount he/she will receive on the maturity of their plan as the rate of interest of the National Savings Certificate does not change during its 5 year validity period.
- While obtaining returns on maturity of NSC, no TDS is deducted from the sum amount at source.
- National Savings Certificate can be taken by visiting any local post office nearby with necessitated identify proof and address proof.
- The National Savings Certificate can be availed by investing a minimum amount of Rs. 100 also or in multiples of 100 with no maximum limit of investment.
- There is no restriction imposed on the number of NSCs an individual can invest in.
- Reinvestment of NSC is permitted only after completion of its maturity period.
- Interest earned gets compounded and reinvested annually by default and is payable only at maturity.
National Savings Bond
The Government of India earlier offered different tenure periods for which an investor could secure their supplementary savings and earn adequate income on it by obtaining a National Savings Certificate. These bonds are as follows –
- VIII Issue – Under this scheme which is currently running, NSC is issued for a duration of 5 years by the government.
- IX Issue – NSC was offered for a 10 years tenure under this bond. However, IX type bonds were discontinued by the government from 20 December, 2015.
NSC Online Types
Acquiring a National Savings Certificate is a highly easy and uncomplicated task. NSC schemes are distinctly flexible and are divided into three types which are mentioned below –
- Single Holder Type – This type of certificate is issued to a single adult candidate or to an individual representing on behalf of a minor or a guardian of a mentally unsound person.
- Joint-A Type – NSC is offered to two individuals under this category where both the holders are jointly paid the maturity amount or it is provided to the survivor in an unfortunate circumstance of death of the other individual.
- Joint-B Type – Similar to Joint-A Type account, this type of certificate is issued to two individuals. However, the maturity returns are paid to any one of the account holders.
NSC Interest Rate Calculator
National Savings Certificate schemes are ranked amongst the most coherent savings plans that are offered in the market. However, while planning to invest in a NSC, it is crucial to learn about how much of a funding do you want to make towards it, to identify the amount of returns it will provide you during the maturity period and what will be its interest rate.
Therefore, to unbound you from these intricate calculations, a highly resourceful tool called the National Savings Certificate has been introduced. It works are follows –
To calculate National Savings Certificate Interest Rate on NSC Calculator, following details are required to be entered –
- Total amount deposited while acquiring the National Savings Certificate.
- Duration of existence of the plan.
- Rate of Interest applicable at the time of purchase of the scheme.
- Date of encashment.
The information given below will be needed to calculate the NSC Maturity Value on the NSC Fund Calculator –
- Principal amount deposited
- Duration of the plan
- Interest Rate
Formula for calculating NSC Maturity Amount
NSC Sum Amount = P × (1+r/200)2n
P – principal amount
r – rate of Interest
n – number of years
NSC Interest Rate Chart (Updated July, 2020)
For instance, let’s assume the following –
Invested Amount – Rs 10,000
Commencement Date – 2nd April, 2020
Applicable Rate of Interest as on May 2020 – 6.8%
Duration – 5 years
|Year||Principal Sum (Rs)||Yearly Interest (Rs)||Aggregate Interest (Rs)||Aggregate Amount (Rs)|
Eligibility Criteria for accessing NSC schemes –
- As National Savings Certificates are curated for single person small savings investments, following are the people who can obtain NSC –
- Indian Residents
- Karta of Hindu Undivided Family
- Individuals who are not eligible for NSC –
- Non-Resident Indian (In case if the person moves out of India after the commencement of the scheme, NSC will remain intact)
- Trusts or Hindu Undivided Families
- Private and Public Limited Companies
How to apply for National Savings Certificate
NSCs can be easily purchased by visiting any nearby post office. Given below is the process on how to successfully apply for NSC and a list of documents that will be required for the verification before allotment of the same.
Step 1: NSC application form – It is necessary to fill out the National Savings Certificate form which can be availed from two modes, namely, e-mode or passbook mode or it can be brought from all Public Sector Banks and top three Private Banks (ICICI, HDFC & Axis)
Step 2: Investment Amount – It is important for an individual interested in purchasing a National Savings Certificate to predetermine the amount they want to finance in the scheme as per their financial allowance and goals. However, it should be kept in consideration that NSC assists in attaining tax reduction while deciding its investment amount.
Step 3: Verification – After filling the relevant details in the application form, the postmaster will first verify your identity and address proof before commencing the process of issuing the NSC. Following are the documents which are required during verification –
- Proof of Identity – Passport/Aadhar Card/PAN Card/Driving License etc
- Proof of Address – Aadhar Card/Voter IDTelephone Bill/Electricity Bill/Bank Statement with a cheque etc
Step 4: Mode of Payment – The amount of payment for purchasing National Savings Certificate can be deposited through the given below means –
- Demand Draft
- Pay Order
- By reinvesting a pre-existing certificate which has reached its maturity period
- Transferring from your Post Office Savings Account
- Step 5: Nominee – The holder is permitted to nominate an individual to claim the maturity amount on a situation like an unfortunate circumstance of his/her death.
- Step 6: Witness – Concludingly, it is necessary to get a witness signature to successfully complete the process of application of NSC.
|Also Read: LIC latest Plans and their Premium|
Premature Withdrawal before National Saving Certificate Maturity
NSC allows the flexibility to encash or withdraw the amount from the post office of any area, inconsiderate of where the policy was originally issued from.
But it is generally not permitted to make a withdrawal from NSC before reaching its period of maturity as it has a lock-in period of 5 years.
However, it can be kept as collateral security. Although, following are the few situations under which a closure of the scheme is permitted –
- On death of the account holder or holders (in case of a joint account)
- On a order given by the court
- By the pledge for forfeiture of the account by a Gazetted Government Officer abiding to the NSC rules.
In case if the withdrawal is initiated before the completion of one year of the National Savings Certificate from its commencement, no interest amount will be provided to the investor and only the deposited amount gets refunded.
Otherwise, if the cancellation is made after one year, the collected interest is also paid along with the contribution sum.
NSC Tax Benefits
As mentioned above, a tax benefit up to Rs. 1.5 Lakhs can be availed annually by the holder of National Savings Certificate under Indian Income Tax Act, 1961, Section 80C.
A tax break is provided on the interest earned on a NSC for the first four years as it gets reinvested by default, put through a limit of maximum 1.5 Lakhs. Although, reinvestment is not done of the interest amount earned in the fifth year, hence, it is applicable for tax as per the candidate’s slab rates.
Thus, financing in a National Savings Certificate offers you with a high rate of interest, benefit of claiming a tax rebate, the interest earned is TDS free, security of invested amount, easy accessibility while withdrawing.
Hence, considering all the key-points mentioned above, buying a National Savings Certificate is a valuable choice, as NSC also assures guaranteed returns with comparatively low risk rate as per other options available in the market.
Is NSC Interest Taxable?
Yes, NSC Interest is taxable. However, since the scheme goes on for minimum 5 years, hence the interest earned during 1st – 4th years gets re-invested in NSC and hence you can claim that also directly under section 80C.
Is NSC Taxable on Withdrawal
Yes, once NSC is matured and you withdraw the full amount, the entire interest amount which is paid to you becomes taxable as per your income tax deduction slab rate.
NSC vs PPF Which one is better?
PPF is better investment option among NSC and PPF. As on May 2020 latest interest rates revised by the Reserve Bank of India, the Government has announced PPF Interest at 7.1% and NSC Interest Rate at 6.8%. Hence, you get 0.3% more returns on PPF investments in long run.