National Savings Certificate (NSC) – Intro, Types, Interest Rates
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National Savings Certificate (NSC)
National Savings Certificates, popularly known as NSC, were heavily promoted by the Indian government in 1950s after India’s independence, to procure funds for nation building. These instruments became much popular among those who wanted to make use of the opportunity to make their investments for a slightly longer time period and then gain the interest rates.
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When they introduced there was a single instrument which was a 6 year National Savings Certificate. A notable feature of the instrument was that there was an accumulation of the earnings over the life of the instrument so that there was no chance of withdrawal before maturity. This meant that the entire money including the earnings came in to the hands of investor only at the time of maturity of the instrument. The money was compounding on a half yearly basis. This is different from most bonds and fixed deposits that offer a cash payout as well as a cumulative option.
Where one can purchase these instruments?
These instruments can be purchased from all post offices in India by following the submission of required details.
Currently there are two types of instruments based on the period of holding.
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What are the different types of NSC s?
Depends upon the type of holding a certificate they can be further classified into following :
A.Single holder Type Certificate:
These are issued to the holder himself or on behalf of the minor.
2.Joint Certificate A :
This type of NSC is issued jointly to 2 adults payable to both the holders jointly.
3.Joint Certificate – B:
This type of NSC is issued jointly to 2 adults payable to either of the holders.
Based on the period of holding following types of Instruments are available :
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1.National Savings Certificates NSC VIII :
This is a 5 years NSC. They were specially designed for Government employees, Businessmen and other salaried classes to encourage savings habit. No maximum limit for investment. No Tax deduction at source for interest earned .Certificates can be kept as collateral security to get loan from banks.Investment up to Rs. 1,50,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act..Trust and HUF cannot invest in this. Rate of interest 8.50% per annum.Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 151.62 after 5 years.
2.National Savings Certificates – IX :
These are issued for a maturity Period of 10 years. Rate of interest is 8.80% per annum. Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 236.60 after 10 years.
Denominations available ?
The National Savings Certificate is issued in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10,000. A person can purchase any number of certificates of any denomination without any limit.
In case of NSC VIII and IX issue, transfer of certificates from one person to another can be done only once from date of issue to date of maturity.At the time of transfer of Certificates from one person to another, old certificates will not be discharged. Name of old holder shall be rounded and name of new holder shall be written on the old certificate and on the purchase application under dated signatures of the authorized Postmaster along with his designation stamp and date stamp of Post office.
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Interest on NSC :
Interest on National Savings Certificate is liable to tax as per the Income Tax Slabs of the Individual. However, no TDS is deducted on such interest but such interest shall be reflected in the Income Tax Return of the Individual.
“Even though this Interest on National Savings Certificate is taxable, this Interest is not paid to the account holder but is reinvested in NSC. As this Interest is re-invested in National Savings Certificate which is a specified instrument u/s 80C, a taxpayer can claim this amount of interest as a tax deduction under Section 80C. of IT act.”
Withdrawal before maturity is not possible except in following cases :
1.On the demise of the Holder or the Holders in case of Joint Holders
2.On forfeiture by a pledgee being a Gazetted Government Officer when the pledge is in conformity with these rules.
3.When ordered by a court of law.