National Savings Certificate is a savings bond scheme initiated by the Government of India that encourages low to middle income investors to invest while also giving tax benefit under Section 80C of Income Tax Act,1961. This scheme can be easily availed through any post office branch.
Who can invest?
This scheme was rolled out primarily for individual citizens of India. Hence, it does not allow Indians residing outside India (NRIs), trusts, Hindu Undivided Families (HUFs), private and public limited companies to invest in this scheme. It can be purchased by an investor for themselves, on behalf of a minor, or in a joint account with another investor from any post office branch on submission of KYC documents (including authorised identification proof and address proof).
Initially, NSC certificates were issued physically by post offices and banks. However, as of July 1, 2016, this service has been discontinued. Now, the investors, who have a savings account with the bank or post office can buy certificates through e-mode.
Features of NSC
The investment made does not have any maximum or minimum limit and can be as low as Rs.100. The maturity period for NSC is fixed at five years. Initially, the certificate was available for a duration of 5 years (NSC VIII Issue) and 10 years (NSC IX Issue) but due to discontinuation of NSC IX Issue in December 2015, only the former is available for individuals to invest. It ensures a consistent income for the investor as the certificate provides an annual fixed interest. The interest rate is updated every quarter by the government.
Benefits of NSC
As NSCs are a government supported scheme, the principal invested in NSC is eligible for tax relief up to Rs.1.5 lakhs annually under Section 80C of the Income Tax Act. The NSCs can also be used to raise loans since banks and NBFCs accept NSC certificates as collateral for secured loans. In this situation, the certificate is affixed with a transfer stamp and then transferred to the bank.
After fulfilment of maturity period
When the NSC reaches maturity, it can be cashed at any Post Office branch, not just the one where the account is created. You must submit an application with facts such as serial number, issuance date, complete name, registered and current address if you want to withdraw money from a branch that is not your account's home branch. Any family member (even a juvenile) can be nominated by the investor to inherit the money in the event of the investor's death.
National Savings Certificates are seen as a good investment option for middle and small investors who look forward to assured returns.