Indialends, 13 Apr 2021

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National Saving Certificate

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It is a fixed income scheme that can be opened at a post office is known as the National Saving Certificate. The scheme is a low-risk product and is secure in nature. The NSC scheme is available at all NSC post offices.  The main objective of launching this scheme is to make individuals learn how to make small or medium savings. Since the scheme is encouraged by the Indian Government, the risk is low in making investments in such schemes.

The main section who can avail of the benefit of this scheme is individuals. No Hindu Undivided Family and Non-Resident Indians are eligible to apply for this scheme. Here are the main eligibility criteria of the NSC scheme:

The eligibility criteria for investors to purchase the NSC are mentioned below:

• The individual must be a citizen of India.
• There is no age limit for individuals in order to purchase a certificate.
• Non-resident Indians cannot invest in NSC.
• Investments can be made with another adult or individuals can buy an NSC on behalf of a minor.
• Under the NSC VIII Issue, HUFs and Trusts are not eligible to invest in the scheme.

Features of National Saving Security Scheme:

Minimum investment:  The minimum amount one can invest in NSC is Rs 100. There are different denominations introduced by the Government of India like Rs 10,000, Rs 5000, Rs 1000, Rs 500, and Rs 100, one can choose accordingly. Initially, small investments can be made, and individuals can increase investments when feasible.

Tenure of maturity:

It ranges between 5-10 years. One can choose as per its convenience.

Rate of interest:

At present, the rate of interest is reduced from 7.9% to 6.8%. It is compounded annually. The interest is payable only at maturity. For example, an investment of Rs.100 will get the subscriber Rs.146.93 after 5 years of investment.

Nominations: 

The family members including minors can be the nominee of your NSC. In case of the demise of the investor during the tenure of the scheme, the nominee will be able to inherit the scheme.

Different types of NSC:

Initially, the NSC IX Issue and the NSC VIII Issue were the two main forms of certificates available. However, as of December 2015, the Government of India stopped the NSC IX Issue. Therefore, only the NSC VIII Issue is available.

Loans against NSC: 

 The NSC can be used in the form of collateral to get a loan from the banks. However, the respective postmaster must authorize the transfer of the certificate to the bank.

Purchase of NSC: 

After submitting the required documents, the scheme can be purchased at post offices.

Transfer of certificate: 

You can easily transfer NSC from one post office to another. Transfer of certificate from one individual to another is also possible. However, the certificate will remain the same and the name of the new owner shall be written on the certificate and the name of the old owner will be rounded.

Advantages of NSC

Given below are the main advantages of investing in the NSC:

• One of the main benefits of investing in NSC is the tax benefits that an individual can avail.
• NSC scheme comes with a guaranteed return. Many individuals prefer the NSC scheme as it can provide a regular income after retirement.
• Except for the interest that is earned in the final year, the remaining interest that is generated is tax-free.
• In case individuals lose the original certificate, a duplicate certificate can be obtained.
• Even after the maturity period, individuals get an option to continue investing in the scheme.
• Transfer of the certificate is allowed from one individual to another. However, it is allowed only a one-time in the lock-in period.
• The interest that is generated is compounded on a yearly basis and reinvested towards the scheme. Therefore, the invested amount of the individual increases without purchasing certificates.

Documents required to NSC:

• The NSC application must be duly submitted.
• Investors must submit original identification proof like Passport, Permanent Account Number (PAN) Card, Voter ID, Senior Citizen ID, Driving license, or Government ID for verification.
• The investor must submit a photograph.
• Investors must submit address proof such as a passport, telephone bill, electricity bill, bank statement along with a cheque as well as a Certificate or an ID card that has been issued by the Post Office.

What are the tax benefits one can avail of?

• According to Section 80 C of the Income Tax Act, 1961, one can get benefits up to 1.5 Lakhs.
• The interest is generated on NSC annually.
• Tax Deducted at Source (TDS) is not applicable to National Savings Certificate. However, as per the marginal income tax rates, the tax must be paid for the interest that is earned.

Maturity period and premature withdrawal under the NSC

• In most of the scenarios, the amount that has been invested towards NSC cannot be used before the maturity period of 5 years. In certain situations, premature withdrawal is allowed. Here are those cases:
• In case the certificate holder is no more.
• On the forfeiture of the certificate. However, the pledgee must be a Gazetted Government Officer.
• If it is a court order that the invested amount can be withdrawn.

However, certain documents must be submitted by the certificate holder for the withdrawal of the funds. Given below are the list of documents that must be submitted:

You are required to submit the original National Saving Certificate

• The NSC encashment form will need to be submitted.
• Proof of identity.
• The attestation of the guardian is compulsory in case the NSC was purchased on behalf of a minor.
• In case the certificate holder passes away, the nominee can encash the invested amount by submitting Annexure 1 (registered at a post office) and Annexure 2 (legal evidence) forms.
• In case the amount is withdrawn within a year, no interest will be paid. A penalty will be charged in case of early withdrawals as well. The maturity amount is paid by the post office by cheque.