National Saving Certificate

National Saving Certificate

National Saving Certificate
National Saving Certificate (NSC) is the most popular saving scheme of the post office. Anyone can invest in this scheme. Then from whether profession he may be salaried, businessmen, farmer or others. The good thing is that it is much better than the FD of the bank or post office. 
In this article I have explained what is NSC? What is its full form and meaning? Information about its rules and current interest rate is given. And also how can it is better than other existing Tax Saving Options?

What is National Saving Certificate? 

NSC means National Saving Certificate it comes under the Small Saving Schemes of the Government of India. These are in the form of certificates with a value of 100, 500, 1000, 5000, 10000. You can buy them by paying the price recorded on them. After 5 years, you can redeem these certificates. You are then refunded by adding the interest made on them along with your deposit.

Note: The scheme originally had two types of certificates – NSC VIII Issue and NSC IX Issue. The government discontinued NSC IX Issue in December 2015. So, only the NSC VIII Issue is open for subscription currently.

Benefits of National Saving Certificate 

The main advantages of NSC are as follows 
  1. Facility even in remote areas as NSC certificates are mainly found in post offices now-a-days the government is serving the services of post offices from city to villages. With the presence of post offices in far flung areas, it is very easy for everyone to get NSC. Due to the introduction of the Core Banking Service in most post offices, there has also been a facility to buy them and redeem them anywhere.
  2. Also available for a minimum of Rs 100 investment a good thing related to NSC is that you can buy NSC for just Rs 100 also and any limit above by adjusting them according to your capacity.
  3. Yes, it must be noted that tax exemption will be available only to NSCs with an amount up to Rs 1.5 lacs. You can buy NSC of 1.5 lakhs every year to get more tax rebate.

Interest rate More than Fixed Deposits

The government is currently paying 6.8% (from 1st  April 2020) interest in NSC. Which is much better than the 6.7% post office FD interest rate. If you compare it with the FD of banks, then you will see a lots of benefit. 
Presently, banks are paying very less interest rates because of economic crises raised by COVID-19 

 Bank Interest Rate on 5 years FDNSC Interest Rate  Difference 
 SBI    5.4% 6.8% -1.40%
 ICICI Bank  5.75% 6.8% -1.05%
 Axis Bank 5.75% 6.8% -1.05%
 PNB    5.40% 6.8% -1.40%

From the above table it is clear that investing in any Bank fixed deposits will not yield more than NSC and in addition the NSC provides tax saving option also.

Let us Understand with an Example 

If a person X buys NSC worth Rs. 1,00,000/- today then at the time of maturity i.e., after 5 years he will get Rs. 1,38,950/- (almost 38% in 5 years) this means yearly X is going to earn Rs. 7,790/-. 
But the interest rate was 6.8% only how could one earn 7.79%?. This is because the interest is compounded yearly hence yielded Rs. 38,950/-.

And, while buying the National Saving Certificate whatever may be the interest rate that will be applicable till the maturity of the bond. there will no change if interest rate on NSC changes the next year.

Premature withdraw of the NSC 

The account will not be closed before maturity except in the following cases,
  1. On the death of the account holder in a single account, or all the account holders in a joint account
  2. On forfeiture by a Pledgee being a Gazetted Officer, when the pledge is in conformity with this Scheme
  3. And when ordered by a court.
  • Where an account is prematurely closed before the expiry of one year from the date of deposit, only principal amount shall be payable.
  • If the account is prematurely closed after the expiry of one year but before the expiry of three years from the date of deposit, the premature closure shall be allowed and on such premature closure of the account interest on principal amount at the rate applicable to the Post Office Savings Account from time to time for the complete months for which the account has been held, shall be payable.
  • If an account is prematurely closed after the expiry of three years from the date of the opening, the amount payable, inclusive of interest accrued for a deposit of one thousand rupees and at a proportionate rate for other amounts of deposits, as shown in below table
National Saving Certificate

This option provides safety of Government of India on your investment and gives good returns 

 

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