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National Savings Certificate (NSC) – A Complete Guide

Last Updated : 30 Oct, 2023
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What is National Savings Certificate?

The National Savings Certificate also called NSC is a type of savings bond scheme that enables customers, usually low- to middle-income investors, to make investments while saving taxes under Section 80c. The NSC, like other fixed-income investments such as Fixed Deposits, provides assured return and complete capital protection. They cannot, however, generate inflation-beating returns like tax-advantaged Mutual Funds and the National Pension System. Essentially, the government is advertising the National Savings Certificate as an investment option for Indian residents. NSC stands for National Savings Certificate.

Features of NSC

The following are NSC’s primary features:

1. Low Investment: NSCs can be acquired for as little as ₹100. The national savings certificate is available in the following denominations: ₹10k, ₹5k, ₹k, ₹500, and ₹100. Small investments can be made at first, and individuals can expand their investments when possible.

2. Maturity Duration: Individuals can pick between the scheme’s two maturity periods of five and ten years.

3. Interest Rate: The current interest rate has been raised from 7% to 7.7%, and it is compounded annually. The interest, however, is only payable at maturity.

4. Nominations: The investor may nominate family members, including minors. If the investor dies during the scheme’s tenure, the nominee will be eligible to inherit the plan.

5. Loan Against National Savings Certificate: The NSC can be utilised as a security or collateral to get loans from banks. However, the submission of the document to the bank must be authorised by the respective postmaster.

6. Certificate Transfer: NSC transfers are available from one post office to another. It is also possible to transfer a certificate from one person to another. However, the document’s authenticity will remain the same, and the new owner’s name will be printed on the certificate, while the former owner’s name will be rounded.

Eligibility of NSC

The following are the eligibility requirements for buyers to purchase the NSC:

  • The person should be a citizen of India.
  • Individuals must be at least 18 years old to buy a national saving certificate.
  • Non-resident Indians are not permitted to invest in NSC.
  • Investments can be made in collaboration with another adult, or persons can purchase an NSC on behalf of a minor.
  • HUFs and Trusts are prohibitted to invest in the scheme under the NSC VIII Issue.

Who Should Invest in NSC?

NSC is an Indian government-sponsored savings program. It is predominantly intended for Indian citizens who wish to invest in a relatively safe, government-backed savings instrument. The following groups of individuals might consider making an investment in NSCs:

1. Low-Risk Tolerance Investors: Government-backed NSCs have been one of the safer investment options available to investors with a low risk tolerance. NSCs are a viable option if you happen to be conservative and favor investments with guaranteed returns.

2. Minimal Investment: NSCs possess an inexpensive minimum investment amount, which makes these individuals affordable to those who routinely save modest amounts. This can be especially beneficial for those with little disposable income.

3. Tax Benefits: Under the provisions of section 80c of the IT Act, NSC investments are entitled to a tax exemption up to a specified limit. This makes NSCs appealing to individuals who wish to minimise their tax burden.

4. Long-term Investors: NSCs have a considerably longer period of maturity (usually 5-10 years), making them appropriate for long-term investors who do not need access to their funds immediately. It can function as a savings mechanism.

5. Rural Investors: Post offices, which are common in rural and semi-urban locations, offer NSCs to rural and semi-urban investors. This ease of access makes it a practical investment opportunity for residents of these regions.

6. Stable Rate of Interest: NSCs offer fixed interest rates, which may be appealing to some investors who favour options with predictable returns and are unconcerned about market fluctuations.

Types of NSC

1. Single Ownership Certificate: This particular certificate is specifically intended for issuance to a solitary individual, as implied by its name. The certificate holder has the authority to select a candidate, but all significant decisions will be made by the certificate holder, not the nominee.  In the event that a minor needs a certificate, it might be issued in the name of an adult who is the legal guardian of the minor.

2. Joint A Type Certificate: This certificate is issued jointly to two adults, and upon maturity, the total sum is payable to both individuals. Both individuals share the decision-making authority, and the signatures of both holders are necessary for cancellation, transfer, or change of nominee.

3. Joint B Type Certificate: A Joint B Type Certificate is provided to two individuals who possess equal decision-making authority. Nevertheless, the maturity proceeds of this particular certificate are only receivable to one individual out of the two.

Documents Required for NSC Application

The following are the documents that must be produced if one wishes to invest in an NSC:

  • The application form for the NSC.
  • For verification, investors must produce an original identification proof such as a passport, permanent account number (PAN), card, voter ID, driving license, senior citizen ID, or government ID.
  • Passport size photograph.
  • Address proof such as an electricity bill, passport, phone bill, bank statement, and a cheque are acceptable.

How to Invest in NSC?

Currently, the NSC scheme is available for purchase in either electronic mode (e-mode) or Passbook mode. You can purchase them at post offices, public sector banks, and authorized private banks. You can buy the NSC scheme online in e-mode if you have an authorized bank or post office savings account and your Internet Banking is enabled. Currently, the interest rate on NSCs is 7.7% annually compounded. Please be advised that physical pre-printed National Savings Certificates issued by post offices and institutions ceased to exist in July 2016.

Benefits of NSC

1. Assured Earnings: NSCs offer set rates of interest, and the government guarantees the returns. This implies that you’ll know exactly how much you’ll get at the end of its term making NSCs an investment with minimal risk.

2. Safer Investment: Because they are supported by the government, NSCs is one of the best investment alternatives accessible in India. Your money is secured, and the interest you receive is likewise protected from market swings.

3. Tax Advantages: NSC investments are qualified for a tax reduction according to Section 80c of the IT Act, up to a certain limit. This allows you to minimise your taxable income, perhaps resulting in a smaller tax payment.

Tax Benefits of NSC investment

Although there is no upper limit on the purchase of National Savings Certificates, investments only of up to ₹1.5 lakh per year qualify the subscriber for tax benefits under Section 80c of the Income Tax Act of 1961.

In addition, the interest earned on NSCs for the first four years is presumed to be reinvested (i.e. adding again to the primary investment) and is therefore eligible for a tax deduction, subject to an annual cap of ₹1.5 lakh. The interest that is earned in the fifth year, however, is not reinvested and is therefore taxable at the investor’s applicable slab rate.

For the first quarter of 2023, the current NSC interest rate is 7.7%.

Frequently Asked Questions (FAQs)

1. Do National Savings Certificate offer tax advantages?

Answer: With Section 80C of the Income Tax Act 1961, deposits in National Savings Certificates are eligible for a maximum deduction of 1.5 lakhs. In addition, the interest earned during the first four years is re-invested to the original principal amount and is therefore eligible for a deduction under section 80C.

2. What is the lowest amount required for investment in NSC?

Answer: Currently, the minimum investment quantity for NSC is Rs. 1000.

3. Which section of the Income Tax Code does NSC fall under?

Answer: The NSC (VIII Issue) is now regulated by the National Savings Certificates (VIII Issue) Scheme, 2019. Until 2019, the governance of NSC was under the jurisdiction of the Government Savings Certificates Act of 1959. The tax advantages associated with NSC, as specified in Section 80c, are included within the provisions of the Income Tax Act, 1961.

4. What are the specific denominations of National Savings Certificates available?

Answer: National Savings Certificates are issued in values of ₹100, ₹500, ₹1k, ₹5k, and ₹10k.

5. Is it possible to redeem a National Savings Certificate before its maturity?


  • Typically, the National Savings Certificate has a duration of 5 years before it reaches maturity. Nevertheless, there are two specific scenarios in which an investor has the opportunity to redeem the funds prior to their scheduled maturity.
  • If a court gives an order for encashment prior to the maturity date.
  • In the event of the investor’s premature demise

6. What is the process for purchasing NSC online?

Answer: If you possess a savings account with an accredited financial institution or the postal service, you have the option to acquire National Savings Certificates in digital format. To purchase the e-mode National Savings Certificate, it is essential to have internet banking services enabled for your account.

7. If I purchase a national savings certificate that offers a 7% return, will the changes in the government’s interest rates will equally impact the previously purchased certificates, not just the new ones?

Answer: The new interest rates apply exclusively to fresh investments.

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