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Post Office National Savings Certificate (NSC)

National Savings Certificate is a post office saving product. National Savings Certificate (NSC) is a fixed income investment scheme targeted specially to small to mid-income investors who can open their NSC account easily with any post office. It not only offers lucrative interest on your investment but also provide saving on income tax under section 80C of the Income Tax Act and hence, one can claim up to Rs.1.50 lakh under the provisions of Section 80C of the Income Tax Act, 1961. The scheme is available only for individual Indian residents. NSC are issued in denominations of Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.10,000. An investor is free to buy as many NSCs as he likes. Main objective of NSC investment is to generate decent returns while saving tax.

Post Office National Savings Certificate is a good scheme for investment for,

  1. Persons willing guaranteed interest and capital protection
  2. Long term investors
  3. Who are risk-averse
  4. Who want to get income tax benefit under section 80C of the Income Tax Act
  5. Want to earn a steady interest

Post Office Features

  • The government has launched NSC on May 8, 1989 as a savings scheme targeted to the individuals only
  • Fixed maturity period of 5 years
  • Offers risk free guaranteed returns
  • Has government backing
  • Currently, only NSC VIII Issue is open for subscription
  • NSC can be transferred from one post office branch to another across the country
  • There is no TDS on NSC payouts
  • Investor can nominate any family member including a minor
  • Any number of accounts can be opened under the NSC scheme

Post Office Benefits

  • Provides guaranteed fixed returns
  • This guaranteed return can be used to create an income ladder
  • NSC qualifies for tax benefit of investment up to Rs.1.50 lakh annually under under Section 80C of the Income Tax Act. Even interest earned on NSC is eligible for income tax benefit under Income Tax section 80C for the first 4 years
  • NSC offers investment flexibility as you can invest a minimum of Rs. 1000 as an initial investment
  • NSC does not have any maximum limit on investment. One can invest any amount as per his choice and objective
  • Financial institutions accept NSC as collateral/security for secured loans

Post Office Eligibility Criteria

  1. The applicant must be an individual Indian resident.
  2. There is no minimum or maximum age for purchasing a certificate.

Hindu Undivided Families (HUFs), Trusts, Private and Public Limited Companies (PLCs) are not eligible to invest in NSC.

Non-Resident Indians (NRIs) are not allowed to invest in NSC.

Who can Open NSC Account?

Following persons can Open NSC Account,

  1. A single adult
  2. Joint Account (up to 3 adults)
  3. A guardian on behalf of minor
  4. A guardian on behalf of person of unsound mind
  5. A minor above 10 years in his own name

Documents Required for NSC

The applicant is required to submit following documents for applying for NSC account.

  • NSC application form
  • Photograph
  • Identity proof such as a passport, permanent account number (PAN) card, voter ID, driver's license, senior citizen ID, etc.
  • Address proof such as passport, phone bill, latest bank statement, latest electricity bill, etc.

Post Office NSC Investment Amount

You can invest as low as Rs.1,000 and in multiples of Rs 100 thereafter, as an initial investment. You may increase the amount as per your choice.

There is no maximum limit of investment, however, income tax benefit will be allowed only for Rs.1.50 lakh per FY.

Post Office NSC Interest Rate

Currently, the rate of interest is 7.70% p.a. for Q4 FY 2023-24 i.e. from 01.01.2024 to 31.03.2024. Interest earned is compounded annually and is reinvested by default but will be payable only at maturity.

The Ministry of Finances under the Government of India reviews the rate of interest every quarter and revises it accordingly.

Interest is earned on NSC on an annual basis. For the initial 4 years, interest is deemed to be reinvested and therefore, is eligible for a tax benefit under section 80C subject to the overall annual limit of Rs.1.50 lakh per FY. However, the interest earned in the 5th year is not reinvested and hence it is taxable as per the investor's applicable income tax slab.

How to Invest in Post Office NSC?

Banks and post offices used to issue NSC certificates which used to be pre-printed. However, the same has now been discontinued. Currently, there are two ways that NSC certificates can be recorded,

  1. Passbook form
  2. Electronic mode (e-mode)

You can buy NSC from any of the post offices, all public sector banks and the top three private banks (ICICI, HDFC and Axis). An applicant may purchase it for himself, on behalf of a minor or as a joint account with another adult.

(1) Buying NSC in Electronic Mode

If you have a savings account with a bank or post office, you can purchase NSC certificates online. For this purpose, you need to have an access to internet banking as a prerequisite for buying NSC in e-mode.

(2) Buying NSC in Passbook Form

  • Fill out the NSC application form available at the post office/participating bank.
  • Attached required documents to the application form.
  • Do not forget to carry original identity proof for verification at the time of buying.
  • You can buy the certificate with cash, cheque or demand draft

If NSC certificate is lost, you can get duplicate certificate issued on furnishing an indemnity bond.

Transfer of Post Office NSC from One Person to Another Person

NSC can be transferred from one person to another person, only when any of the following conditions fulfills.

  1. From account holder to nominee/legal heirs on the death of account holder
  2. From account holder to joint holder(s) on the death of account holder
  3. On order by the court
  4. On pledging of account to the specified authority

Post Office NSC Maturity Period

Maturity period of NSC is 5 years.

You will receive the entire maturity value on maturity. As there is no TDS is made from NSC payouts, you need to pay the applicable tax on it according to your income slab.

Post Office NSC Tax Benefits

Income tax exemption under section 80C of Income Tax Act is allowed on NSC investments up to Rs 1.50 lakh per financial year. Interest earned on NSC annually, for the initial 4 years are deemed to be reinvested and therefore, is eligible for a tax benefit under section 80C subject to the overall annual limit of Rs.1.50 lakh per FY. However, the interest earned in the 5th year is not reinvested and hence it is taxable as per the investor's applicable income tax slab.

The investment in NSC is exempt from Tax Deduction at Source (TDS) at the time of withdrawal which means that no TDS will be made from the NSC proceeds.

Post Office NSC Premature Closure

Premature closure of NSC account is generally not allowed, i.e. one cannot exit the scheme early. However, NSC account can be closed before maturity, if any of the following conditions is fulfilled.

  1. In case of death of an account holder
  2. If there is a court order for account closure
  3. On forfeiture by a pledgee who is a Gazetted Government Officer for it
 

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