If you want to grow your money without risk, the National Savings Certificate (NSC) can be a smart and simple option. Backed by the Indian government, this scheme gives fixed returns and tax benefits. It’s best suited for people who want stable earnings without taking any market risks.
At present, the NSC offers 7.7% interest per annum, and the investment is locked in for five years. The interest is compounded annually but paid at the time of maturity.
Let’s understand what makes NSC a good choice and who can benefit from it.
Who Can Invest in NSC?
- Any Indian citizen can open an NSC account.
- You can invest individually or jointly.
- NSC can also be purchased in the name of a minor. When the child turns 18, the account converts to their name.
- NSC is available at all post offices across India.
You can buy certificates in amounts of Rs.100, Rs.500, Rs.1,000, Rs.5,000, and Rs.10,000. The minimum investment is Rs.1,000, and there is no maximum limit.
Who Cannot Invest in NSC?
- NRIs (Non-Resident Indians)
- Hindu Undivided Families (HUFs)
- Public or private companies
- Trusts, societies, and institutions
However, if an individual becomes an NRI after buying NSC, they can continue to hold it till maturity on a non-repatriable basis.
How NSC Interest Works
- The interest is compounded yearly and added to the principal.
- You receive the full amount with interest after 5 years.
- You cannot extend or renew the certificate at maturity. You must purchase a new NSC at the current interest rate if you wish to continue.
NSC Interest Calculator (Example with Rs.25 lakh)
- Investment Amount: Rs.25,00,000
- Interest Rate: 7.7% (compounded annually)
- Tenure: 5 years
- Maturity Amount: Rs.36,47,582
- Total Interest Earned: Rs.11,47,582
Top 5 Benefits of NSC
- Risk-Free Returns
NSC is backed by the government, making it a secure investment. - Tax Saving Under Section 80C
Investments up to Rs.1.5 lakh per year qualify for tax exemption. - Collateral for Loans
You can use the certificate as collateral to get loans from banks. - Better Interest Than FDs
The 7.7% return is often higher than many fixed deposits. - No Market Dependency
The returns are fixed and do not depend on stock market performance.
Tax Rules for NSC Investors
- You get a tax exemption under Section 80C for investments up to Rs.1.5 lakh.
- The interest earned each year is considered reinvested, and it qualifies for a tax deduction for the first 4 years.
- In the 5th year, the interest is taxable under your income slab.
- No TDS (Tax Deducted at Source) is applied, but you must report the interest while filing your income tax return each year.
How to Show NSC Interest in ITR
As per CBDT rules, the interest earned from NSC should be declared in your annual income tax return. Even though the interest is not paid yearly, you must still report the amount reinvested as income.
Rules for Transferring NSC
You can transfer NSC from one person to another during the five-year lock-in period. The original certificate is not cancelled, but the new holder’s name is written on the same certificate.
Transfers are allowed under the following conditions:
- On death of the certificate holder to the nominee or legal heir
- Among joint holders, in case one holder passes away
- Based on a court order
- To a creditor, if pledged for a loan with permission of the postmaster
How to Invest in NSC
- Visit your nearest post office.
- Ask for the NSC application form.
- Submit KYC documents (Aadhaar, PAN, etc.).
- Make the payment in cash, cheque, or through a post office savings account.
- You will receive a passbook or digital certificate as proof.
Is NSC the Right Option for You?
NSC is best for people who want a safe investment with fixed returns and tax benefits. It is especially useful for:
- Salaried individuals looking to save taxes
- Senior citizens who want fixed income
- Parents planning long-term savings for children
- Investors who want to balance high-risk assets with a secure option
