What Is A National Savings Certificate (NSC) & How Does It Work?

Every investor looks for options that offer safety, stability, and guaranteed returns. The National Savings Certificate (NSC) is one such investment tool, backed by the Government of India and known for its low risk and assured interest. It is a fixed-income savings scheme that can be easily opened at any post office, making it an accessible and reliable choice for conservative investors. Whether your goal is to build a strong portfolio, reduce overall risk, or enjoy tax-saving benefits, this investment scheme remains a dependable option.

In this blog, we will explore what is NSC, along with its eligibility criteria, required documents, key features, benefits, and the step-by-step process to invest in it.

What Is a National Savings Certificate?

National Savings Certificate is a government-backed savings instrument where you can start investing with as little as ₹1,000, with no upper limit on investment. The government of India started this initiative to encourage individuals earning low to mid-income to invest in a stable scheme while also saving their hard-earned money. You can invest in this scheme in the post offices available across India.

This investment scheme offers tax benefits of up to ₹1.5 lakhs under section 80C of the Income Tax Act of 1961. However, it may not be the best scheme for those looking for a liquid investment option because it comes with a lock-in period of five years.

Eligibility Criteria for NSC

The following is the list of eligibility criteria that one is required to fulfil to invest in this fixed-income savings scheme –

• The person must be an Indian citizen. Non-resident Indians (NRIs) are not eligible to invest in the scheme.
• The person must be older than 10 years to invest in this scheme.
• Hindu Undivided Families (HUFs), Trusts, and Private and Public Limited Companies (PLCs) are not eligible to invest.

Documents Required to Apply for NSC

You need to submit the following documents when applying for this government-backed investment option:

• Identity proof: You need to provide original identification proof such as a permanent account number (PAN) card, passport, voter ID, driver’s license, senior citizen ID, or government ID for verification.
• Address proof: You need to provide address proof like a passport, an electricity bill, a bank statement, or a telephone bill.
• Photograph: You need to provide a passport-size photograph.

Key Features & Benefits of National Savings Certificate

Here are some of the key features of the NSC scheme:

• Interest rates: Currently, the interest rate on NSC is 7.7% and compounded annually. You can earn an annual fixed interest, which is revised quarterly by the government, ensuring regular income.
• Tax benefit: This scheme qualifies for tax benefits under section 80C of the Income Tax Act of 1961, offering you a tax benefit of up to ₹1.5 lakhs.
• Maturity period: The maturity period of this investment option is five years.
• Minimum amount: Anybody can start their investment with as little as ₹1,000 and in multiples of 100 after that, with no cap on the maximum limit.
• Easily Available: You can easily access the certificate from any post office after submission of the necessary KYC documents. Plus, you can also transfer the certificate from one post office to another, as well as from one person to another, without any impact on interest accrual/maturity of the original certificate.
• Loan collaterals: You can even use these certificates to secure loans in banks and NBFCs, as they are accepted as collateral or security. All you need is the transfer stamp on the certificates by the postmaster to submit them to the bank.
• Nomination: Any family member (even a minor) of yours can be nominated in case of an unfortunate event in the future.
• Premature withdrawal of certificates: This certificate come with a lock-in period of 5 years, allowing the fund’s withdrawal only after maturity. But, in case of the death of the scheme owner or an order from the court, the amount can be withdrawn.

How To Invest in NSC

There are two ways—online and offline- to invest in this scheme. Read the following procedure step-by-step-

Steps to Follow to Apply Through the Offline Mode

To invest in the NSC scheme offline, follow the steps below:

• First, get the NSC application form printed out online or at any post office.
• Fill in the necessary details.
• Next, submit the self-attested copies of the form with the required KYC documents.
• Keep your original documents ready for verification purposes, and pay the amount you want to invest.
• After application approval, collect the NSC of your application.

Steps to Follow to Apply Through the Online Mode

To invest in the NSC scheme online, follow the steps below:

• Visit the Department of Posts (DOP) internet banking portal and log in to your account.
• Now, click on ‘General Services’ and select ‘Service Requests’.
• Next, click on ‘New Requests’ and choose ‘NSC Account – Open an NSC Account (For NSC)’.
• Now, enter the amount you want to deposit and choose the debit account linked to the post office savings account.
• Select ‘Click Here’ to read the terms and conditions and accept them.
• Enter the transaction password and click on ‘Submit’.
• Now, the deposit receipt will be available to view and download.
• You can log in and click on ‘Accounts’ to view the details of your NSC account.

Conclusion

A National Savings Certificate is one of the popular tax-saving options introduced by the government of India. With guaranteed returns and tax benefits, this scheme is no doubt a secure investment option for risk-averse individuals. Investors can make more returns compared to similar options like fixed deposits and provident funds. However, inflation may not be adjusted through this scheme.

Start exploring more such investment options through Torus Digital and make informed decisions about your savings.