National Savings Certificate

The National Savings Certificate -- popularly referred to by its acronym NSC, this is a post-office savings scheme. Backed by the government, it is one of the safest investment options.

• Minimum investment

Minimum investment is Rs. 500/- with No upper or maximum limit.

NSC is sold in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. So, if you want to invest Rs 50,000, you will have to buy five certificates of Rs 10,000 each.

·         Want to buy?

You can either hold an NSC certificate jointly with someone or An Individual as well as a minor through guardian can purchase. However Companies, Trusts, Societies Non-resident Indian/HUF and any other Institutions not eligible to purchase.

And since it is a post office savings scheme, you can just approach any post office.

• Rate of interest 8% compounded half yearly.

Rate of interest 8% compounded half yearly. Let's say on April 1, 2008, you invested Rs 50,000 in NSC. On April 1, 2009, your NSC account would be worth Rs 54,080

If the rate of interest was compounded just once a year, it would be Rs 79,343.72 on maturity after six years. But, since it is compounded twice annually, it will be Rs 80,051.61.

·         Income Tax

When you invest in NSC, you get a deduction under Section 80C of the Income Tax Act. This is up to a limit of Rs 1, 00,000 and includes your investment in the Employees Provident Fund and Public Provident Fund, life insurance premium payments as well as principal repayments on your home loan.

It is being Tax Saving instrument the Rebate admissible under section 80 C of Income Tax Act.

 

Interest on NSC is taxable under the head 'Income from other sources'.

Generally, it is advisable to declare accrued interest on NSC on a yearly basis. So, over the period of six years, you could declare the interest income for each year. In such cases, it does not amount to a huge sum.

If you do not declare the interest on an accrual basis, then the entire interest earned (difference between the amount deposited and the maturity value) would accumulate in the year of maturity. You could then claim it under Section 80C, but it would be a huge amount and would be taxable at the current applicable tax rate.

Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.

 

Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.

 

Interest income is taxable but no TDS

 

Deposits are exempt from Wealth tax.

Facility of reinvestment on maturity is available.

·         Duration

Your money stays invested for six years from the date of investment

Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.

Certificate can be pledged as security against a loan to banks/ Govt. Institutions.

Facility of encashment of certificates is available through banks.

But there is No pre-mature encashment available.

·         Transferability

Certificates are transferable from one Post office to any Post office.

Certificates are transferable from one person to another person before maturity.

Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.

Nomination facility available.

Facility of purchase/payment to the holder of Power of attorney.