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This article gives an insight into the investment procedure in NSC, its basic features, rate of interest and the tax implications of investing in National Savings Certificate(VIII).

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National Savings Certificate

What is NSC?
National Savings Certificate is a small Savings scheme (currently NSC VIII), issued by the Dept. of Post, Government of India. It is available for purchase across all head post offices and other authorized post offices in the country.

Who can Purchase:
  • Individuals for themselves
  • Jointly by two adults
  • An adult on behalf of a minor
  • A minor
  • A Trust
Investment procedure:
The NSC (VIII) is can be purchased as follows:
  • Available in denominations of Rs. 100, Rs.500, Rs. 1000, Rs.5000 & Rs. 10,000
  • Can be purchased either directly or through authorized agents.
  • Mode of payment is through cash, local cheque, pay order or demand draft favouring the post master.
Basic features:
  • The rate of interest on NSC is 8.6%.
  • It has a maturity period of 5 years.
  • The minimum limit for investment is Rs.100/-
  • There is no maximum limit.
  • Premature encashment is not allowed under normal circumstances. If a person so wishes to encash prematurely, before the completion of one year, then only the face value is paid. Whereas, if the encashment is beyond one year but before 3 years, then simple interest on the face value, at the rate applicable at the time of withdrawal, will be paid.
  • Loan facility is available on pledging the certificate with RBI, scheduled bank or comparative society like a co-operative bank or Housing finance companies approved by the National Housing Bank, with the prior permission of the post master.
  • Tax Implications:
  • Any investment in the National Savingss Certificate up to Rs.1, 00,000/- qualifies for rebate under section 80C of IT Act, though the interest earned is taxable. Therefore, it is advisable to declare the yearly interest on NSC, failing which the entire interest has to be declared at the time of maturity.
  • Trust and HUF cannot invest.
  • No Tax deduction at source
Transfer Procedure:
  • Transfer of the NSC from one person to another is possible, through the post office. There is a nominal fee for this transfer procedure.
  • A certificate can also be transferred from the post office where it was purchased to another post office, by making an application in a format given by the by the Director General Posts at either of the two Post Offices.
Advantages of NSC:
  • It is highly secure as it is issued by the Government of India.
  • Tax benefits make it an attractive to salaried people and IT assesses.
  • The maturity period is not as high as in the case of PPF and is limited to 5 years.
  • One can avail loan facility by pledging the NSC.

  • IndrajeetGoon:
    It is highly secured and maturity period is not too high.
    15-Apr-2013 07:12 PM
  • intekhab alam:
    how much profit we will get today on NSC of Rs 100000 purchased on 30th July,2011?
    03-Sep-2012 04:58 PM