Thursday, December 12, 2019
Finance

National Savings Certificates

What is National Savings Certificate?
National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at all post office counters in the country. This scheme is specially designed for Government employees, Businessmen and other salaried classes who are IT assesses. It is a long term safe savings option for the investor. Trust and HUF cannot invest. The scheme combines growth in money with reductions in tax liability as per the provisions of the Income Tax Act, 1961. The duration of a NSC scheme is 5 year. 

Features
NSCs are issued in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000 for a maturity period of 5 years. There is no prescribed upper limit on investment.

Individuals, singly or jointly or on behalf of minors and trust can purchase a NSC by applying to the Post Office through a representative or an agent. 

One person can be nominated for certificates of denomination of Rs. 100- and more than one person can be nominated for higher denominations.

The certificates are easily transferable from one person to another through the post office. There is a nominal fee for registering the transfer. They can also be transferred from one post office to another.

One can take a loan against the NSC by pledging it to the RBI or a scheduled bank or a co-operative society, a corporation or a government company, a housing finance company approved by the National Housing Bank etc with the permission of the concerned post master.

Though premature encashment is not possible under normal course, under sub-rule (1) of rule 16  it is possible after the expiry of three years from the date of purchase of certificate.

Tax benefits are available on amounts invested in NSC under section 88, and exemption can be claimed under section 80L for interest accrued on the NSC. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 88. 

Investment up to Rs. 1,00,000/- per annum qualifies for IT Rebate under section 80C of IT Act.

Return
NSC having a high interest rate at 8.80 % compounded half yearly. Post maturity interest will be paid for a maximum period  of 24 months at the rate  applicable to individual savings account.  A Rs 100  denomination certificate will increase to Rs.151.62 on completion of 5 years.

Advantages
The investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1-4-2007. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 80C. NSCs can be transferred from one person to another through the post office on the payment of a prescribed fee. They can also be transferred from one post office to another. The scheme has the backing of the Government of India so there are no risks associated with your investment.

How to start?
Any individual or on behalf of minors and trust can purchase a NSC by applying to the Post Office through a representative or an agent. Payments can be made in cash, cheque or DD or by raising a debit in the savings account held by the purchaser in the Post Office. The issue of certificate will be subject to the realization of the cheque, pay order, DD. The date of the certificate will be the date of realization or encashment of the cheque. If a certificate is lost, destroyed, stolen or mutilated, a duplicate can be issued by the post-office on payment of the prescribed fee.