NATIONAL SAVINGS CERTIFICATE

National Savings Certificate (NSC) is a low risk fixed income investment scheme that can be bought from the nearest post office.The scheme is a Government of India initiative and encourages subscribers – mainly small to mid-income investors – to invest while saving on income tax.

Features:

• Scheme generates a guaranteed 8{b0988e010e07ba20ee33a479185d14d9077cb2e44f161afad58556567fbd3bb4} p.a. return. (Aug FY’ 22)
• Comes with a fixed maturity period of 5 years.
• No maximum limit on the purchase of NSCs
• Open only for individual Indian resident citizens
• Upon maturity, you will receive the entire maturity value. There is no TDS on NSC payouts, the subscriber should pay the applicable tax on it
• Accepted as collateral or security for secured loans.
• Easily accessible as you can purchase it from any post office.

Pros and Cons

• Start an investment with as low as Rs. 1000 however only investments upto Rs. 1.5 Lakh can claim tax rebate
• Interests earned are automatically reinvested and thus the investor enjoys the power of compounding. However, returns can’t beat inflation.
• Easily transferable from one post office branch to another however one can not exit the scheme early.( No Premature Withdrawal)
• Though the interest rate is compounded annually, it is only payable at maturity.

Tax benefits of NSC investment

Investments of up to Rs 1.5 lakh plus the interest earned ( added back to the initial investment) eligible for a tax rebate under Section 80C.

For instance, if you purchase certificates worth Rs 1,000, you are eligible for a tax rebate on that initial investment amount in the first year. But in the second year, you can claim a tax deduction on the NSC investment(s) that year as well as the interest earned in the first year.