National Savings Certificates (NSC): A Simple Guide for Beginners

The National Savings Certificate (NSC), an all-India investment scheme by Government of India that offers fixed returns and tax benefits. This government backed investment plan aims to promote regular savings among Indian citizens. NSC is a relatively low-risk investment, making it ideal for those who prefer safe and steady investments that guarantees returns. Moreover, the rate of returns offers by NSC are fixed and tend to be higher than rates offered by Fixed Deposits (FDs).

Below are some key features offered by National Savings Certificate (NSC). If any these features interest you, then consider investing in this scheme.

Top Features of National Savings Certificate

Fixed Rate of Interest

Interest rates for NSC are always fixed. Note that the interest rate for your NSC plan will depend on when you start investing in the scheme. The rate of interest for NSC is regularly reviewed every quarter by the Ministry of Finance. The current rate of interest for NSC, as of June 2024, is 7.7%. However, this rate may increase or decrease next quarter. So, ensure that you opt into NSC when the rates are high.

Guaranteed Returns

As NSC rates are fixed, your returns will be completely guaranteed. You can even accurately calculate the returns you will receive on the maturity date. This makes NSC an attractive investment option for risk-averse investors.

Short Tenure

Another benefit of NSC is its short tenure. The maturity period for NSC plans is just 5 years. However, note that you cannot withdraw any money from your NSC plan during this time. Your investment will be locked-in for the entire duration of the tenure.

Loan Option

NSC investments can be used as collateral to secure a loan. However, note that failure to repay the loan will lead to the termination of your NSC scheme.

Affordability

National Savings Certificate is an affordable savings option for people from all walks of life. The minimum amount required to start a NSC deposit is just ₹1,000. There is no maximum limit for NSC investments.

Tax Benefits

One of the biggest selling points of NSC is the tax benefits that it provides. Your NSC investments are tax deductible thanks to provisions provided under Section 80C of the Income Tax Act. Under Section 80C, you can get a maximum tax deduction of ₹1.5 lakhs through your NSC investments.

How to Buy a National Savings Certificate

You can start investing in NSC by sharing your documents with any government post office or authorized bank. You can download all the relevant forms for NSC from the National Savings Institute website. Visit the nearest bank or post office and submit all the relevant forms to purchase your NSC certificate. Note that NSC is issued online, so you will need an internet banking account to purchase your plan.

Steps to Invest in National Savings Certificate

• First collect the relevant forms, either by downloading them online or by getting them from a post office.

• Fill out the forms and submit them to an authorized bank or post office.

• You will also need to submit KYC documents to finalize your purchase.

• Pay the amount you want to invest.

• You will receive your National Savings Certificate once your purchase has been approved.

Or alternatively, you can purchase an NSC plan online. Note that to purchase NSC online, you will need an account on the Department of Posts (DOP) website. Follow the steps below to buy NSC online:

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

• Find the ‘Service Requests’ option under the ‘General Services’ dropdown.

• Initiate a new request and select ‘Open an NSC Account’.

• You can then choose the amount of money you want to invest into your NSC.

• Accept the terms and conditions, and then finalize your purchase by clicking on ‘Submit’.

• You can then download your NSC receipt and even view the plan’s performance online through your account details.

Who Can Invest in NSC?

National Savings Certificate is only available for citizens of India who are still living within the country. Even NRIs cannot purchase NSC. Moreover, NSC is only available for individuals, meaning that legal entities like Hindu Undivided Families (HUFs), companies etc. cannot invest in it. Also, only adults over the age of 18 can buy an NSC> However, parents may choose to buy an NSC under the name of their child, provided that the child is over the age of 10.

You will also need to following documents to purchase an NSC:

• Any ID Proof including passport, PAN Card, Aadhaar Card, driving license etc.

• Address proof (an ID proof with address can also suffice)

• A passport sized photograph that needs to be submitted during purchase of your NSC.

How Do NSC Rates Compare to Other Tax Saving Investments?

National Savings Certificate has a 5-year lock-in period and a steady interest rate that remains the same for the entire tenure. However, the interest rate will depend on when you buy your NSC plan. Interest rates are revised every quarter. Below are some other popular tax saving investments and their pros/cons.

Fixed Deposits (FDs)

NSC interest rates are comparable to that of Fixed Deposits (FDs). FDs also have a 5-year lock-in period, though their interest rate can be fixed or floating depending on your bank. Fixed rate means that your interest rate will remain the same as when you first started the deposit. On the other hand, floating interest rates will change based on RBI’s current FD rate declarations. FD rate of interest can range anywhere between 5-8%.

ELSS

ELSS (Equity Linked Savings Scheme) is another popular tax saving investment that only has a 3-year lock-in. However, this savings instrument is market-linked, and hence the returns will also depend on market conditions. This makes ELSS a risker investment when compared to NSC.  

NPS

National Pension Scheme (NPS) is another government backed savings scheme that provides market-linked returns. Historically, the interest rate for NPS has ranged between 8-10%. However, your NPS investments are locked-in until you retire.

PPF

Public Provident Funds are an affordable investment scheme that offer a minimum deposit of ₹500 per year. You can even take loans from your PPF account after three years. Interest rates for PPF are also revised every quarter. Currently, PPF interest rate stands at 7.1% for FY 24-25. However, PPF has a long lock-in period of 15 years.

Endowment Life Insurance Plans

Life insurance plans with a savings element also enjoy multiple tax benefits under Section 80C and Section 10(10D). If you prefer low-risk, guaranteed returns, choose a guaranteed income plan that offers fixed rate of returns alongside life cover. But if you want higher returns and don’t mind some investment risk, then choose a Unit Linked Insurance Plan (ULIP). ULIPs invest your premiums into market-linked funds while also assuring your family’s security via life coverage. Moreover, your life insurance returns may be completely tax free if your plan satisfies the T&Cs of Section 10(10D).

Conclusion

NSC is a simple and affordable investment option for risk-averse investors. Moreover, the short lock-in period makes it ideal for those who want quick returns to fulfil an upcoming financial goal. Remember to deduct your NSC investments from your taxes! You will be eligible for deductions up to ₹1.5 lakhs under Section 80C. The only downside of NSC is that you cannot withdraw any money from your account until the 5-year tenure comes to an end.

 

Swati Tumar - Travel & Finance Writer   

Swati is a Writer in the day and an illustrator at night. Among her interests, she is quite fond of art and all things creative. She often indulges herself in creating doodles, illustrations, and other forms of content. She identifies herself as an avid traveler and shameless foodie.