National Savings Certificate (NSC)

What is National Savings Certificate (NSC)?

National Savings Certificate (NSC) scheme is a savings scheme by the Postal Department of Government of India.

National Savings Certificates are a type of saving bonds issued by the Government, where money has to be invested for a fixed period after which the investor gets back his original amount and an additional interest.

For the common man, NSC is a very good investment option because it is safe, simple and has tax benefits.

What are the features of National Savings Certificate (NSC)?

  • Buyer can invest any amount starting from Rs 100
  • Interest is accrued on a half-yearly basis
  • At the end of the defined period, 5 or 10 years depending on the chosen scheme, the buyer will get back a lump-sum amount (investment + interest income over the years)
  • There is no interest payment to the buyer during the holding period

What are the tax aspects of National Savings Certificate (NSC)?

  • Interest accrued is taxable every year. It is however not paid out to the investor.
  • There is no Tax Deducted at Source (TDS) on the product
  • A buyer can get tax deduction on his invested amount under Section 80C upto Rs 1.5 lakhs
  • Accrued income is deemed re-invested. Hence this can be used to save tax.

I shall discuss this aspect of National Savings Certificate in a separate post. In the rest of the post we will try to understand the basic features of the product.

What are the available types of National Savings Certificate (NSC)?

Currently there are two National Savings Certificate issues/ schemes:

  • NSC XIII issue which is for 5 years
  • NSC IX issue which is for 10 years

Features of National Savings Certificate (NSC) XIII Issue

  • Rate of interest is 8.5%
  • Holding period is 5 years
  • Maturity value of a certificate of Rs 100/- is Rs 151.62 after 5 years

Illustration

  • In June 2015, Mr Umapada invests Rs. 1 lakhs in National Savings Certificate (NSC) XIII Issue.
  • After 5 years in 2020, his Rs 1 lakhs shall grow to Rs 1.51 lakhs, and he will get back the full amount.

Features of National Savings Certificate (NSC) IX Issue

  • Rate of interest is 8.8%
  • Holding period is 10 years
  • Maturity value of a certificate of Rs 100/- is Rs 236.6 after 10 years

Illustration

  • In June 2015, Mr Umapada invests Rs. 1 lakhs in National Savings Certificate (NSC) XIII Issue.
  • After 10 years in 2025, his Rs 1 lakhs shall grow to Rs 2.36 lakhs, and he will get back the full amount.

FINAL WORDS

I hope you found this article useful. If you have any comments please feel free to contact me. Before making any investment decision, please contact your financial adviser.

I have provided this article for educational purpose only.

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References

India Post NSC
Wikipedia NSC

Subhodeep Mukhopadhyay

I am a Management Consultant in the Education Sector. In my previous corporate career, I have worked in Banking, Private Equity and Software industry. I am an MBA in Finance/ Computer Engineer and enjoy doing equity research and financial analysis in my free time.

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