National Saving Certificates a time tested investment

National Saving Certificates (NSC) are a time-tested tax-saving instrument that combine adequate returns with high safety. This is the only scheme which gives tax benefits on the investment and the interest which is reinvested.

NSCs have low liquidity and premature withdrawals can be done only under specific circumstances, such as the death of the holder(s), forfeiture by the nominee, or under court’s order. Yet, NSCs are a popular investment option of many Indian Household.

Tax Consideration of NSC

Amount deposited (upto Rs. 100,000) in NSCs qualifies for tax rebate under Section 80C. Annual interest earned is deemed to be reinvested and also qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act. The interest on these certificates will be liable to tax on the basis of annual accrual rate.

NSC Account Holding

The NSC certificates are issued to the individuals and trusts only. The individual includes

• single adult
• two adults in joint names
• an adult, whether parent/guardian or not, on behalf of a minor and
• to a minor directly.

NSCs can’t be purchased on behalf of a Hindu Undivided Family. NRI’s are not eligible to purchase this.

Mode Of Payment for NSC

The NSC certificate can be purchased on payment by

• cash
• local cheque, pay order or demand draft drawn in favour of the post-master and
• c.by presenting a duly-signed withdrawal Form or cheque, together with the pass-book for withdrawal from the post office savings account standing at the credit of the purchase at the same post office.

Nomination in NSC

Nomination facility is available in NSC.

Investment Limits of NSC

The NSC certificates can be purchased for any amount. There is no limit on holding. These certificates are in denominations of Rs.100, Rs.500, Rs.1,000, Rs.5,000 and Rs.10,000.

Tenure of NSC

The maturity period of NSCs is six years.

Transferability of NSC

NSCs can be transferred from one person to another through the post office after the expiry of one year, on payment of a prescribed fee. Before one year, transfers are limited to close relatives, heir of deceased, survivor in case of joint holder etc.,

Premature Encashment of NSC

The certificates can be prematurely encashed in case of

• Death of the holder or any of the holders in case of joint holders
• When ordered by a court of law.

If NSC certificate is encashed within a period of one year from the date of the certificate, only the face value of the certificate shall be payable.

If NSC certificate is encashed after expiry of one year but before the expiry of three years from the date of certificate, the encashment shall be at a discount. On encashment of the certificate, an amount equivalent to the face value of the certificate, together with simple interest shall be payable. Such simple interest shall be calculated on the face value at the rate applicable from time to time to single accounts for the complete months for which the certificate has been held. The difference between the aforesaid simple interest and the interest accruing shall be deemed to be the discount.

After the expiry of 3 years from the date of the NSC certificate, the amount payable inclusive of interest accrued and after adjustment of discount, shall be as specified by the government from time to time.

If NSC certificate is lost or destroyed or stolen or mutilated or defaced, a duplicate certificate in lieu of it can be issued on payment of prescribed fee.

NSC Encashment At Maturity

After 6 years of the date of issue, the certificates can be encashed at the office of issue or at an office other than the office of issue, in which case the certificates will be verified from the office of issue before encashment.