National Savings Certificate

National Savings Certificate

The central government of India has launched the National Savings Certificate scheme which is a fixed income investment plan that targets the lower and middle class people of Indian society. The plan tenure is 5 years. One can invest in this scheme either as oneself, jointly or on behalf of a minor. As it has fixed returns and low risks, therefore people are more attracted towards this scheme. One can avail of this investment scheme by visiting the branch of the post office. The main objective of this scheme is to encourage people to make small or medium savings for the future along with the tax benefit under Section 80C of the Income Tax Act. There is no fixed upper limit to invest in this plan. To know about this scheme, have a look at the following mentions.

Eligibility Criteria: Who Should Invest in NSC?

Here are the eligibility criteria for NSC to check whether you are eligible or not.

AgeA minor above 10 years in his name.
Investment Amount

Minimum of Rs. 1000/- and in multiples of Rs. 100/-

No Maximum Limit

Interest Rate7.7% p.a.
Tenure5 Years
Joint AccountUp to 3 adults

Features & Benefits of National Savings Certificate

Listed below are the features and benefits of the National Savings Certificate. 

  • Fixed Interest Rate

The National Savings Certificate (NSC) offers a fixed interest rate that remains constant throughout the investment period. This feature ensures that investors receive predictable and stable returns on their investments. The fixed interest rate provides clarity and certainty, allowing investors to have a clear understanding of the returns they can expect over the entire duration of their investment in the NSC scheme.

  • Government Backing

The National Savings Certificate (NSC) is backed by the Government of India, which adds a significant layer of safety and security to this investment option. The assurance comes from the fact that the principal amount invested, along with the accrued interest, is guaranteed by the government. This government backing makes NSC a reliable and secure choice for investors who prioritize safety and want the assurance that their invested funds will be safeguarded. The guarantee from the Government of India enhances the credibility of NSC as a low-risk investment option.

  • Small Savings Scheme

The National Savings Certificate (NSC) is strategically designed to foster a savings culture among individuals. One of its key features in promoting this culture is the provision of an affordable minimum investment amount. By allowing individuals to start with a relatively low investment, NSC encourages even those with modest means to participate in the scheme.

Furthermore, the flexibility to make investments in multiples of the minimum amount accommodates a wide range of investors with varying financial capacities. This inclusive approach promotes small savings, making the NSC accessible to a broader segment of the population.

  • Tax Benefits

The amount invested in the National Savings Certificate (NSC) qualifies for a tax deduction under Section 80C of the Indian Income Tax Act. This provision allows individuals to claim a deduction on their taxable income, up to a specified limit, based on the amount invested in NSC. By leveraging this benefit, investors can potentially lower their overall tax liability.

Section 80C of the Income Tax Act covers various eligible investments and expenditures, and NSC is one of the instruments that provide taxpayers with an avenue to reduce their taxable income.

  • Compounding of Interest

The interest on National Savings Certificates (NSC) is compounded annually. This compounding mechanism means that the interest earned is reinvested into the certificate, leading to the accrual of interest on both the principal amount and the previously earned interest. This compounding effect can result in accelerated growth of the investment over time.

By earning interest on the interest, investors benefit from a compounding snowball effect, which contributes to the overall growth of their investment. This feature enhances the long-term wealth-building potential of NSC and can be advantageous for individuals seeking to maximize returns throughout the investment.

  • Fixed Maturity Period

The National Savings Certificate (NSC) has a fixed maturity period of five years. After this period, the certificate holder is entitled to receive the principal amount along with the accumulated interest. This characteristic of NSC provides a clear and predetermined timeline for investors to anticipate the return of their invested funds, making it a structured and predictable savings and investment avenue.

  • Accessibility

One of the notable advantages of the National Savings Certificate (NSC) is its wide accessibility. Individuals can easily purchase NSC from designated post offices located across India. This accessibility is beneficial for people in both urban and rural areas, as post offices are typically widespread and easily reachable.

  • Nomination Facility

The National Savings Certificate (NSC) offers a nomination facility, enabling investors to nominate a person who will receive the investment and accumulated interest in the unfortunate event of the certificate holder’s death. This provision serves as a valuable feature for estate planning and ensures a smooth transfer of the investment to the nominee.

  • No Market Risk

One of the key advantages of the National Savings Certificate (NSC) is its immunity to market fluctuations and volatility. The fixed interest rate provided by NSC ensures that the investment is not impacted by changes in market conditions. This stability makes NSC an ideal investment option for risk-averse individuals who prioritize guaranteed returns and want to avoid the uncertainties associated with market dynamics.

  • Premature Encashment

Even though the National Savings Certificate (NSC) comes with a predetermined maturity period, there are instances in which it may be redeemed before the specified term. These situations include the unfortunate demise of the certificate holder, legal directives from the court, or the forfeiture of a pledgee in the event of default.

What are the Tax benefits of NSC investment?

Investors in the National Savings Certificate (NSC) can avail of tax benefits as per Section 80C of the Indian Income Tax Act. Here are the primary tax advantages associated with NSC:

  • Tax Deduction

The investment made in NSC qualifies for a tax deduction under Section 80C. As per the current tax laws, the maximum deduction allowed under this section is up to Rs. 1.5 lakh in a financial year, though it’s important to note that this limit is subject to any changes in tax regulations. This provision encourages individuals to invest in NSC as part of their overall tax planning strategy, offering a beneficial avenue for reducing their taxable income.

  • Exempt at Maturity

The interest income is considered deemed reinvested and qualifies for tax exemption under Section 80C of the Indian Income Tax Act. This implies that the interest is not subject to taxation each year; instead, it accumulates and remains exempt from tax until the time of maturity or withdrawal.

  • Tax Deferred

The interest earned on National Savings Certificates (NSC) is not subject to annual taxation, offering a tax deferral benefit. This deferral allows investors to postpone the tax liability on the accrued interest until the maturity of the NSC. This unique feature provides investors with an opportunity to allow their investment to grow over time without the immediate impact of annual taxes on the interest income.

  • Cumulative Tax Benefit

The tax benefits associated with National Savings Certificates (NSC) can be availed cumulatively with other eligible investments and expenses under Section 80C. This section encompasses a variety of financial instruments and expenditures, including life insurance premiums, provident fund contributions, tuition fees, and more. It’s important to note that the combined deduction under Section 80C cannot surpass the specified limit, which is subject to the prevailing tax laws.

Can I Transfer the National Savings Certificate to Another Person?

The transfer of National Savings Certificates (NSC) from one person to another is permitted under specific conditions only:

  • Upon the death of the account holder, the transfer can occur to the nominee or legal heirs.
  • In the event of the account holder’s death, the transfer is allowed to joint holder(s).
  • The transfer may take place based on an order by the court.
  • Pledging of the account to a specified authority allows for the transfer.
  • These conditions provide a structured framework for the transfer of NSC, ensuring clarity and adherence to legal and regulatory requirements in various scenarios.

How to invest in NSC?

If you are looking to invest in NSC, the following are the steps that you will need to follow.

  • Head to the closest Post Office branch and present the completed NSC application form. Ensure all necessary details are provided on the form, including the Post Office branch name, your savings account number at the Post Office, and the applicant’s name.
  • Attach self-attested copies of the necessary documents and proofs as specified by the Post Office along with your NSC application form. Additionally, carry the original documents for verification purposes. This ensures that the required documentation is provided accurately and in compliance with the Post Office’s verification procedures.
  • Proceed to the ‘Nomination’ section and input the names of the applicants and the nominee. In the designated table, furnish information such as the applicant’s relationship with the nominee, the nominee’s complete address, Aadhaar number, and other relevant details. Ensure that all details in the nomination section are accurately and comprehensively provided.
  • Complete the payment for your investment using cash, cheque, or demand draft. If using a cheque or demand draft, remember to note down the serial number and date. In instances where the applicant is illiterate, include the signatures of two witnesses, in addition to the applicant’s signature. With these steps, your NSC application process is complete.
  • After processing your application, you will receive an acknowledgment, signifying the initiation of your National Savings Certificate (NSC) account. This acknowledgment serves as confirmation that your application has been successfully received and is in progress.

Documents Required for NSC Investment

When it comes to investing in the National Savings Certificate (NSC), you need to submit the following documents:

  • A duly filled National Savings Certificate Application Form.
  • Address proof, which may include documents like a Passport and Aadhar card.
  • ID proof such as PAN Card, Aadhaar Card, Driving License, etc.
  • Passport-sized photographs.
  • Cash or Cheque for the amount to be deposited as per the investor’s preference.
  • Ensuring that all required documents are submitted accurately and completely will facilitate a smooth application process for obtaining the National Savings Certificate.

Premature closure: Know the Required Steps Beforehand

Premature closure of the National Savings Certificate (NSC) before the completion of 5 years is generally not permitted except under the following conditions:

  • Death of the Account Holder(s): In the event of the death of a single account holder or any or all account holders in a joint account, premature closure is allowed.
  • Forfeiture by a Pledgee: A Gazetted officer acting as a pledgee may enforce forfeiture, leading to premature closure.
  • Court Order: Premature closure is permissible based on an order issued by a court.

These conditions define the exceptional circumstances under which an NSC may be closed before the stipulated 5-year maturity period.

Frequently Asked Questions

It will take NSC approximately ten years and four months, at the current 7.7% annual return rate, to double your investment.

The mature span of NSCs is five years. Only in the event of an investor’s untimely death or if a court order is issued in this regard may an NSC be cashed before its maturity date.

The amount of NSCs that can be purchased is unlimited. However, an NSC investment must be made with a minimum of Rs. 1000.

NSC was previously available in two versions: NSC VIII and NSC XI. The latter had a tenure of ten years, while the former had a tenure of five. The latter version, nevertheless, is no longer available. As a result, the only NSC VIII issue that is currently accessible for subscription has a 5-year term.

To start an NSC account, you must have at least Rs. 1,000. You can deposit more money by making additional deposits of Rs. 100. The amount you can deposit has no upper limit.

Article Published by

Related Posts

Probus Insurance


TDS (Tax Deducted at Source) and TCS (Tax Collected at Source) are two important taxes in India. TDS is the tax deducted when income

Read More »
How To Check PAN Card Application Status
Probus Insurance

PAN Card Application Status

The Permanent Account Number (PAN) is a unique alphanumeric identifier assigned to all entities engaged in financial activities within India. This unique code is

Read More »