Tally Automation
Feb 21, 2024

NSC - A Government-Backed Scheme for Secure and Tax-Efficient Savings

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Raja Ray

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If you are looking for a safe and smart way to save tax and earn interest, you might want to consider investing in NSC - National Savings Certificate. NSC is a government-backed savings scheme that offers a fixed rate of interest and tax benefits under Section 80C of the Income Tax Act, 1961. NSC is ideal for small and medium investors who want to save money for their long-term goals while reducing their tax liability.

In this blog post, we will tell you everything you need to know about NSC - National Savings Certificate - Eligibility, Interest Rate & Tax Saving Benefits. We will also show you how to invest in NSC and how to calculate your returns and tax savings.

What is NSC?

NSC stands for National Savings Certificate. It is a savings scheme launched by the Government of India in 1950 to promote savings and investment among the citizens. NSC is issued by post offices across the country and can be purchased by any Indian resident.

NSC is a fixed-income investment scheme that offers a fixed rate of interest for a fixed period. The interest rate is revised every quarter by the government and is currently 7.7% per annum for Q1 FY 2023-24. The maturity period of NSC is 5 years.

NSC is also a tax-saving scheme that allows you to claim a deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961. The interest earned on NSC is also eligible for deduction under Section 80C, except for the last year when it is taxable as income from other sources.

What are the benefits of NSC?

NSC offers several benefits to the investors, such as:

  • Safety: NSC is a government-backed scheme that offers guaranteed returns and capital protection. There is no risk of default or loss of principal amount.
  • Interest: NSC offers a competitive rate of interest that is usually higher than other fixed-income instruments like bank FDs or PPFs. The interest is compounded annually and paid at maturity along with the principal amount.
  • Tax savings: NSC allows you to save tax on your investment and interest income under Section 80C of the Income Tax Act, 1961. You can claim a deduction of up to Rs. 1.5 lakh on your NSC investment and interest income, except for the last year, when the - interest is taxable as income from other sources.
  • Liquidity: NSC can be encashed before maturity in case of emergency or financial need. However, there are certain conditions and penalties for premature withdrawal from the NSC. You can also use NSC as collateral to avail of loans from banks or other financial institutions.
  • Flexibility: NSC can be purchased for any amount in multiples of Rs. 100, subject to a minimum of Rs. 1000. There is no maximum limit on the purchase of NSC. You can also purchase NSC in single or joint names, or in the name of a minor.

How to invest in NSC?

Investing in NSC is very easy and convenient. You just need to follow these simple steps:

Step 1: Visit your nearest post office and fill up the NSC application form. You can also download the form online from the India Post website.

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Step 2: Submit the duly filled form along with the required documents, such as identity proof, address proof, PAN card, etc.

Step 3: Pay the desired amount of investment in cash or cheque or demand draft. You can also pay online through the India Post website.

Step 4: Collect your NSC certificate from the post office. You can also opt for a passbook or an e-certificate instead of a physical certificate.

Step 5: Keep your NSC certificate or passbook or e-certificate safe till maturity. You can also nominate a person to receive the maturity amount in case of your death.

How to calculate your returns and tax savings from NSC?

You can use an online NSC calculator to calculate your returns and tax savings from NSC. An NSC calculator is a tool that helps you to estimate the interest and maturity amount of your NSC investment and the tax savings under Section 80C of the Income Tax Act, 1961.

To use an NSC calculator, you just need to enter the following details:

  • The amount of investment
  • The interest rate
  • The tenure
  • The tax slab

The NSC calculator will then show you the following results:

  • The interest amount for each year.
  • The maturity amount at the end of the tenure.
  • The tax savings for each year under Section 80C.

You can also change the input values and see how the output values change accordingly. You can use the NSC calculator to compare different NSC schemes and choose the best one for you.

NSC offers a secure way to save tax and earn interest, backed by the government. It's ideal for small to medium investors, allowing flexible investments and premature encashment. Utilize online calculators to assess returns and tax benefits, and compare NSC schemes for the best fit.

FAQS

Q: What is the minimum and maximum amount that I can invest in NSC?

A: You can invest in NSC for any amount in multiples of Rs. 100, subject to a minimum of Rs. 1000. There is no maximum limit on the purchase of NSC. However, you can only claim a deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Q: How can I buy and redeem NSC?

A: You can buy NSC from any post office across the country by filling up an application form and submitting the required documents and payment. You can also buy NSC online through the India Post website. You will receive an NSC certificate or passbook or e-certificate as proof of your investment.

You can redeem NSC at maturity by presenting your NSC certificate or passbook or e-certificate at the post office where you bought it. You can also redeem NSC before maturity in case of emergency or financial need, subject to certain conditions and penalties.

Q: What are the advantages of NSC over other savings schemes?

A: NSC has several advantages over other savings schemes, such as:

  • It offers a higher rate of interest than bank FDs or PPFs.
  • It has a shorter maturity period of 5 years than PPF (15 years) or bank FDs (up to 10 years).
  • It has no maximum limit on the investment amount unlike PPF (Rs. 1.5 lakh per year) or bank FDs (Rs. 1.5 lakh per year for tax-saving FDs).
  • It can be used as collateral to avail loans from banks or other financial institutions.
  • It can be transferred from one person to another or from one post office to another.

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