Post Office National Savings Certificates

What is a Post Office National Savings Certificate?

The full form of NSC is National Savings Certificates, which are low-risk investment options offered by the Indian government through post offices. The NSC certificates provide a fixed interest rate for a 5-year term and allow tax savings on your investment. 

Overview of Post Office National Savings Certificate

Eligibility Criteria for NSC Post Office

The eligibility criteria for investing in National Savings Certificates (NSC) at a post office are as follows:

• Citizenship: You must be a resident Indian citizen.

• Age: There is no minimum or maximum age limit for individuals to invest in NSC.

• Account type: You can invest individually, jointly with up to three other adults, or as a guardian on behalf of a minor above 10 years old.

• Investment entity: Certain entities are not eligible to invest in NSCs, including:

  • Hindu Undivided Families (HUFs)

  • Trusts

  • Public and private limited companies

IMPORTANT NOTE: Non-resident Indians (NRIs) cannot purchase new NSCs. However, existing NSCs can be held till maturity if the investor becomes an NRI after purchase.

Benefits of National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a popular investment option in India that offers several benefits, especially for risk-averse investors. Some of the key advantages of investing in NSC are mentioned below:

1. Guaranteed Returns

   The National Savings Certificate (NSC) currently offers a guaranteed return of 7.7% per annum for investors. Historically, the returns provided by NSC have been higher than those from Fixed Deposits (FDs).

2. Types of NSC

   There are two types of NSC certificates:

   • NSC VIII Issue: Currently available for subscription.

   • NSC IX Issue: Discontinued in December 2015.

3. Tax Benefits

   NSC is a government-backed tax-saving scheme. You can claim a deduction of up to Rs.1.5 lakh under Section 80C of the Income Tax Act, 1961.

4. Investment Requirements

   • Minimum Investment: Rs.1,000 (in multiples of Rs.100).

   • Maximum Investment: No upper limit.

   • Flexibility: Investors can increase the amount when feasible.

5. Interest Rate

   • Current Rate: 7.7% per annum for Q1 FY 2024-25.

   • Revision: The government revises the interest rate quarterly.

   • Compounding: Interest is compounded annually and payable at maturity.

6. Maturity Period

   The maturity period for NSC is 5 years from the deposit date.

7. Accessibility

   NSC can be purchased at any post office by submitting the necessary documents and undergoing KYC verification. The certificate is transferable between post office branches.

8. Loan Collateral

   NSC certificates can be used as collateral or security for secured loans from banks and NBFCs. The concerned postmaster must put a transfer stamp on the certificate and transfer it to the bank.

9. Power of Compounding

   The interest earned is compounded and reinvested by default, which enhances the overall returns. However, the returns may not always outpace inflation.

10. Nomination

    You can nominate a family member (including minors) to inherit the NSC in the event of your demise.

11. Corpus After Maturity

    Upon maturity, you receive the entire maturity value. There is no TDS on NSC payouts, but you are responsible for paying the applicable tax on the returns.

12. Transferability:

    The NSC Post Office certificate can be transferred from one person to another and one post office to another, enhancing flexibility.

13. Premature Withdrawal

    Premature withdrawal is generally not permitted except in exceptional cases such as your unfortunate demise or a court order.

Historical NSC Interest Rate List

Tax Benefits of NSC Scheme

• Section 80C Deduction: Investments in NSC are eligible for tax deduction under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh per financial year.

• Interest Accrual Tax Benefit: The interest earned on NSC is reinvested and also qualifies for a deduction under Section 80C, enhancing the overall tax-saving potential.

• Maturity Taxation: Interest is taxable only in the year of maturity, reducing the annual tax burden.

• No TDS: NSC interest is exempt from Tax Deducted at Source (TDS), ensuring the entire interest amount is credited without deductions.

Points to Remember: 

• There is no upper limit on the total amount you can invest in NSC. But only the amount invested up to Rs. 1.5 lakh qualifies for tax deduction.

• Unlike fixed deposits, TDS (Tax Deducted at Source) is not applicable on the interest amount of NSC.

Comparison Between

Fixed Deposits, Guaranteed Return Plans & Debt Mutual Fund

Guaranteed Return Plans, Fixed Deposits &
Debt Mutual Fund

Guaranteed Return Plans

Returns Before Tax

7.5% ^(TAX-FREE)

Returns After Tax

7.5%

Guaranteed Returns

Yes

Life Cover

Yes

Tax on Profit

Tax Free*

Risk

No Risk

Still Better than FD’s and Debt Mutual Fund

Fixed Deposits

Returns Before Tax

7% ^(TAXABLE)

Returns After Tax

4.8%

Guaranteed Returns

Yes

Life Cover

No

Tax on Profit

Taxable

Risk

Low Risk

Debt Mutual Fund

Returns Before Tax

8% ^(TAXABLE)

Returns After Tax

5.5%

Guaranteed Returns

No

Life Cover

No

Tax on Profit

Taxable

Risk

High Risk

VIEW PLANS

*For annual premium upto ₹5 Lacs

Steps to Buy a National Savings Certificate Post Office

There are two ways to buy a National Savings Certificate (NSC) from India Post:

1. Online:

   • Log in to your Department of Posts (DOP) internet banking account.

   • Navigate to "General Services" and then "Service Requests."

   • Click on "New Requests" and choose "NSC Account - Open an NSC Account (For NSC)."

   • Enter the investment amount and choose the debit account linked to your PO savings account.

   • Review and accept the terms and conditions.

   • Submit the transaction. You'll receive a deposit receipt for your records.

2. Offline:

   • Collect the NSC application form. You can download it online or pick one up at any post office branch.

   • Fill out the application form. Make sure to enter all details accurately.

   • Submit the form with KYC documents. You'll need self-attested copies of identity proof (Aadhaar card, PAN card, etc.) and address proof (Aadhaar card, Voter ID, etc.) Bring the originals for verification as well.

   • Make the payment by cash, cheque, or demand draft drawn in favor of the postmaster. You can also use your linked Post Office savings account for the investment.

   • Once your application is processed, you'll receive the NSC certificate.

Documents Required to Buy a NSC Certificate

When applying for an NSC at the post office, you will need to submit the following documents:

• Completed NSC Application Form (Form-1). You can get this form from the post office where you plan to purchase the NSC.

• Recent passport-sized photograph

• Identity proof (originals) such as PAN card, Aadhaar card, Voter ID, or passport

• Address proof (originals) such as Aadhaar card, passport, utility bills, or bank statements

NSC Certificate Vs. Other Post Office Savings Scheme

Steps to Request for a Duplicate NSC Scheme Certificate

• Fill & Submit Form: Obtain Form NC-29 (available at post offices) and submit it at any post office branch.

• Include Details: Attach a statement mentioning your name, NSC account number, amount, date of issuance, and reason for needing a duplicate.

• Indemnity Bond: Submit a completed Indemnity Bond (Form NC-54a or NC-54b with bank guarantee) to guarantee no misuse of the original NSC (if found).

• From NC-61: Form NC-61 is needed if the original application form is missing.

• FIR Copy (Optional): If your NSC was lost or stolen, include a copy of the FIR.

• Processing & Issuance: The post office will process your application and issue a duplicate NSC upon verification.