Interest rate in National Savings Certificate (NSC) – 7 Key Advantages

Interest rate in National Savings Certificate , How to invest , Advantages and disadvantages of NSC | Post office NSC | buy nsc online hdfc

This post was most recently updated on January 1st, 2023

National Savings Certificates (NSC) are a popular investment option in India, offered by the Indian government through the post office. They are a safe and secure way to save money and earn a fixed rate of return over a period of time. The Interest rate on National Savings Certificate (NSC) is 7% in 2023.

Interest rate in National Savings Certificate
The interest rate in National Savings Certificate

NSCs, come in two different denominations: 100 and 500 rupees. Up to Rs. 1.5 lakh every fiscal year in multiples of these denominations, may be purchased. The certificates can be bought jointly by two adults and are issued in the names of specific individuals. The interest on NSCs is compounded yearly and has a maturity of five or ten years.

Consider reading – 13 Safe investment options in India

Key advantages of National Savings Certificates (NSC)

There are several advantages to investing in National Savings Certificates (NSCs) in India:

  1. Fixed-rate of return: NSCs offer a fixed rate of return, which is currently 6.8% per annum. This rate is generally higher than the interest rates offered by banks on fixed deposits.
  2. Tax benefits: Investments made in NSCs are eligible for tax deductions under Section 80C of the Income Tax Act. This means that the investments made in NSCs can be claimed as deductions while computing the taxable income.
  3. Convenient: NSCs can be purchased from any post office in India, and can also be easily transferred from one post office to another or from one person to another.
  4. Safe and secure: NSCs are a safe and secure investment option as they are issued by the Indian government.
  5. Flexibility: NSCs are available in two denominations (Rs. 100 and Rs. 500) and can be purchased in multiples of these denominations, up to a maximum of Rs. 1.5 lakh per financial year. They have a maturity period of 5 or 10 years, and the interest is compounded annually.
  6. Nomination facility: NSCs have a nomination facility, which means that an investor can nominate a person to receive the certificate in the event of their death. This ensures that the investment is passed on to the nominated person smoothly and efficiently.
  7. Partial withdrawal: Investors can partially withdraw their investment in NSCs after the completion of 3 years from the date of issue. However, a penalty will be charged for such withdrawals.

Key Disadvantages of National Savings Certificates (NSC)

While National Savings Certificates (NSCs) have several advantages, there are also some disadvantages to consider:

  1. Low liquidity: NSCs are not liquid investments, which means that they cannot be easily converted into cash before the maturity period. If an investor needs to withdraw their investment before the maturity period, they will have to pay a penalty.
  2. Low returns: The rate of return on NSCs is generally lower than other investment options such as mutual funds or stocks. This means that investors may not be able to earn as much money on their investment as they would with other options.
  3. No provision for premature encashment: There is no provision for premature encashment of NSCs, which means that investors cannot withdraw their investment before the maturity period.
  4. Interest rates may fluctuate: The interest rate on NSCs is reviewed by the government every quarter, which means that it may fluctuate over time. This can affect the overall return on investment.
  5. Risk of loss or damage: There is a risk of loss or damage to the physical NSC certificates, which can be a problem for investors who do not have a secure place to store them.

How to invest in National Savings Certificates?

To invest in National Savings Certificates (NSCs) in India, follow these steps:

  1. Visit a post office: NSCs can be purchased from any post office in India.
  2. Fill out an application form: You will need to fill out an application form and provide your personal details, including your name, address, and PAN card number.
  3. Choose the denomination and number of certificates: NSCs are available in two denominations: Rs. 100 and Rs. 500. You can purchase them in multiples of these denominations, up to a maximum of Rs. 1.5 lakh per financial year.
  4. Choose the maturity period: NSCs have a maturity period of 5 or 10 years. Choose the period that best suits your investment goals.
  5. Make the payment: You can make the payment for your NSCs by cash, cheque, or demand draft.
  6. Receive your certificates: Once the payment has been made, you will receive your NSC certificates. It is important to keep these certificates in a safe and secure place.
  7. Make any additional investments: You can make additional investments in NSCs at any time by visiting a post office and filling out a new application form.

It is important to note that NSCs are not liquid investments and cannot be easily converted into cash before the maturity period. If you need to withdraw your investment before the maturity period, you will have to pay a penalty. It is also important to remember that the interest rate on NSCs is reviewed by the government every quarter, which means that it may fluctuate over time.

How to fill out an NSC application form?

To fill out a National Savings Certificate (NSC) application form in India, you will need to follow these steps:

  1. Obtain the application form: You can obtain the National Savings Certificate application form from a post office or bank branch that sells NSCs. You can also download the form from the website of the Ministry of Finance or the India Post website.
  2. Fill out the personal details section: In this section, you will need to provide your personal details, such as your name, address, and contact information.
  3. Select the type of NSC: You will need to select the type of National Savings Certificate that you want to purchase. There are two types of National Savings Certificates available: NSC VIII Issue and NSC IX Issue. The NSC VIII Issue has a maturity period of 5 years, while the NSC IX Issue has a maturity period of 10 years.
  4. Specify the amount of investment: You will need to specify the amount that you want to invest in NSCs. The minimum investment amount is INR 100 (about $1.40) and there is no maximum limit.
  5. Select the mode of payment: You will need to select the mode of payment, which can be cash, cheque, or demand draft. If you are paying by cheque or demand draft, you will need to provide the necessary details, such as the bank name, branch, and account number.
  6. Provide the nominee’s details: If you want to nominate a person to receive the encashed amount in the event of your death, you will need to provide the nominee’s details, such as their name, relationship, and contact information. Please make sure you have a nominee for your NSC investment, this will help in the smooth claim process in the event of the death of the investor.
  7. Sign the form: You will need to sign the form to confirm that the information provided is accurate and complete. If you are purchasing NSCs on behalf of a minor, the guardian will need to sign the form.
  8. Submit the form and supporting documents: Once you have filled out the form and gathered the necessary documents, such as proof of identity and address, you will need to submit them to the post office or bank.

It’s important to note that you may need to provide additional documents or information, depending on the post office or bank’s requirements. It’s advisable to check with the post office or bank for the complete list of documents and information that you will need to submit.

Documents Required for NSC

Below are the required documents to purchase NSC Certificates:

  • Original identity proof has to be submitted for verification
  • The NSC application form (procured from a post office) has to be filled out.
  • NSC can be purchased with cheque, cash, or a demand draft in favor of the postmaster of the post office where you buy your NSC
  • The signature of the witness is needed to complete the formalities
  • Proof of Identity (driving license, voter id)
  • Address proof
  • Photograph

If you are purchasing NSC online then you don’t need to produce these documents as you must have provided the required documents while opening your post office/Bank account.

How to Buy National Savings Certificates (NSC) online?

You can National Savings Certificates (NSC) online in 2 ways:

  1. Post Office: If you have a post office savings account then you can log in to your post office savings account and buy NSC online.
  2. Public Sector Banks/ Major private sector banks: If you have a savings bank account in any public sector banks or major private sector banks like ICICI, HDFC, or Axis then you will be able to buy NSC directly by using Internet banking services.

How to link NSC with Aadhaar?

You can link your National Savings Certificates (NSC) with your Aadhaar number, which is a unique 12-digit identification number issued by the Indian government, in the following ways:

  1. Online: You can link your National Savings Certificate with your Aadhaar number online through the India Post website. You will need to provide your NSC number and Aadhaar number to complete the linking process.
  2. Offline: You can also link your National Savings Certificate with your Aadhaar number offline by visiting your nearest post office or bank branch that sells NSCs. You will need to provide your original NSC certificates, along with a photocopy of your Aadhaar card, to the post office or bank to complete the linking process.

It’s important to note that linking your NSC with your Aadhaar number is optional, but it can make it easier for you to access and manage your NSC accounts online. It’s also advisable to keep your NSC and Aadhaar linking up to date to avoid any issues with the encashment of your NSC certificates.

National Savings Certificate Calculator

Use below National Savings Certificate Calculator to calculate your investment in NSC

Consider reading – Top 10 best investment options in India

NSC vs ELSS Funds vs PPF Vs NPS vs FD

Here are the key differences between NSC vs ELSS Funds vs PPF Vs NPS vs FD:

InvestmentInterest rateLock-in PeriodRisk Profile
NSC6.8% p.a.5 yearsLow-risk
ELSS fundsMarket-linked, historical returns show
12% to 15% p.a.
3 yearsMarket-related risks
PPF7.1% p.a.15 yearsLow-risk
NPSMarket-linked, historical returns show
8% to 10% p.a.
Till retirementMarket-related risks
FD4% to 6% p.a.5 yearsLow-risk
ULIPMarket-linked, historical returns show
8% to 10% p.a.
5 yearsMarket-related risks
NSC vs ELSS Funds vs PPF Vs NPS vs FD

How to show NSC interest in income tax?

You can show the NSC interest earned in one of the following ways while filing an ITR:

  • You can show the interest earned from NSC under ‘Income from Other Sources’.
    1. You can claim a deduction for interest earned from NSC, but you don’t show it as income. In this case, you can consider the entire interest income you have earned over the years as income in the last year.
    2. Don’t claim the interest earned as a deduction or income. In this case, all the interest earned will be counted as ‘Income from Other Sources’ in the last year. Only the first four years’ interest will be counted as a deduction.

NSC or KVP? Which is better?

The National Savings Certificate (NSC) and Kisan Vikas Patra are two schemes that operate very differently and have very different goals. Here is a comparative table to illustrate this distinction.

ParametersNSCKVP
EligibilityResident Indians onlyOnly Resident Indians and Trusts
Minimum Deposit AmountRs.100Rs.1,000
Maximum Deposit AmountNo limitNo limit
Interest Rate (Q4 of FY 2022-2023)7% p.a.7.2% p.a.
Investment Tenure5 years120 months
Premature WithdrawalNot allowedOnly after 30 months from the date of investment
Tax BenefitsAvailableNot Available
Loan FacilityAvailableAvailable
How to purchaseAt Post Office branchesAt Post Office and participating bank branches
NSC or KVP

How to encash/redeem NSC certificates after maturity?

SCs have a maturity period of 5 or 10 years and can be encashed after they reach maturity. Here are the steps to encash NSC certificates after maturity:

  1. Visit your nearest post office or bank branch that sells NSCs: You will need to physically visit a post office or bank branch that sells NSCs to encash your certificates.
  2. Submit your NSC certificates: You will need to submit the original NSC certificates along with any supporting documents, such as proof of identity and address, to the post office or bank.
  3. Fill out the encashment form: You will need to fill out an encashment form, which can be obtained at the post office or bank. The form will require you to provide your personal details, such as your name, address, and bank account details.
  4. Submit the encashment form and supporting documents: Once you have filled out the encashment form and gathered all the required documents, you will need to submit them to the post office or bank.
  5. Receive the encashed amount: Once your National Savings Certificate has been encashed, you will receive the encashed amount, which will include the principal investment and accumulated interest, in your bank account.

It’s important to note that encashing National Savings Certificate after maturity may involve certain fees and charges, such as a penalty for premature encashment. It’s advisable to check with the post office or bank for the applicable fees and charges before encashing your NSC certificates.

How to withdraw NSC before maturity?

National Savings Certificates have a maturity period of 5 or 10 years and can be encashed before they reach maturity, but a penalty may be applicable. Here are the steps to withdraw NSC before maturity:

  1. Visit your nearest post office or bank branch that sells National Savings Certificates: You will need to physically visit a post office or bank branch that sells NSCs to encash your certificates.
  2. Submit your NSC certificates: You will need to submit the original NSC certificates along with any supporting documents, such as proof of identity and address, to the post office or bank.
  3. Fill out the encashment form: You will need to fill out an encashment form, which can be obtained at the post office or bank. The form will require you to provide your personal details, such as your name, address, and bank account details.
  4. Submit the encashment form and supporting documents: Once you have filled out the encashment form and gathered all the required documents, you will need to submit them to the post office or bank.
  5. Pay the penalty: If you are withdrawing the NSC before maturity, you will need to pay a penalty, which is calculated as a percentage of the principal invested. The penalty rate varies depending on the type of NSC and the remaining period of maturity.
  6. Receive the encashed amount: Once your National Savings Certificates have been encashed, you will receive the encashed amount, which will include the principal investment minus the penalty, in your bank account.

It’s important to note that encashing NSC certificates before maturity may involve certain fees and charges, such as a penalty for premature encashment. It’s advisable to check with the post office or bank for the applicable fees and charges before encashing your NSC certificates

FAQs National Savings Certificate

  1. What are NSCs?

    NSCs are investment options offered by the Indian government through the post office. They are a safe and secure way to save money and earn a fixed rate of return over a period of time.

  2. How do NSCs work?

    NSCs are issued in the name of an individual, and can also be purchased jointly by two adults. They are available in two denominations (Rs. 100 and Rs. 500) and can be purchased in multiples of these denominations, up to a maximum of Rs. 1.5 lakh per financial year. NSCs have a maturity period of 5 or 10 years, and the interest is compounded annually.

  3. What are the advantages of NSCs?

    Some of the advantages of NSCs include a fixed rate of return, tax benefits, convenience, and safety and security. They are also flexible, as they can be purchased in different denominations and have a choice of maturity periods.

  4. What are the disadvantages of NSCs?

    Some of the disadvantages of NSCs include low liquidity, low returns, no provision for premature encashment, and the risk of loss or damage to the physical certificates.

  5. How do I invest in NSCs?

    To invest in NSCs, you will need to visit a post office and fill out an application form. You will need to provide your personal details, including your name, address, and PAN card number. You will also need to choose the denomination and number of certificates you wish to purchase, and the maturity period (5 or 10 years). Payment can be made by cash, cheque, or demand draft.

  6. Can I withdraw my investment before the maturity period?

    NSCs are not a liquid investment and cannot be easily converted into cash before the maturity period. If you need to withdraw your investment before the maturity period, you will have to pay a penalty.

  7. Is the interest rate on NSCs fixed?

    The interest rate on NSCs is fixed at 6.8% per annum, but it is reviewed by the government every quarter, which means that it may fluctuate over time.

  8. Are NSCs eligible for tax deductions?

    Yes, investments made in NSCs are eligible for tax deductions under Section 80C of the Income Tax Act. This means that the investments made in NSCs can be claimed as deductions while computing the taxable income.

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