As Indian we have crossed so many milestones to come this far. Even a decade before, we couldn’t have imagined all the things we have achieved. Financial security and literacy is the incredible among those. I have seen my father wanted to save money but tricky matter was for him how to do that. Nowadays he knows. That is the story of so many other people around us. With time our income level and financial stability has increased. As a result people are looking for investment opportunities.
The financial market is so vast and there are so many instruments available. Some can give high interest rates, some offer better protection of money invested etc. but the question is which one we should opt for. Let’s say you want to invest some money, what comes in your mind. If the answer is in a safe instrument which also can give attractive interest rate then I can say it’s possible. The Post Office National Saving Certificate (NSC) can fulfill your investment wish and also offer you the amazing tax benefit.
Back in the time of the post-independence Government of India introduced the scheme to raise money from the public to invest in various projects. After that so many time have passed but the schemes is a priority if someone is thinking about a safe investment. It has maintained its old glory and also have become more attractive with the passing time by introducing new benefits. Indian Post Office issues this certificate to the general public. Any individual can invest his money except a Non Resident Indian (NRI) and Hindu Undivided Family (HUF). Trusts are also not eligible but account can be opened for a minor by his or her guardian. Joints accounts can also be opened and are of two types. Joint Type A certificate pay both the account holders and Joint Type B certificate pay either of the account holders. Single Holder Type certificate is for the individuals.
Certificates are available in denominations of Rs.100, Rs.500, Rs.1000, Rs.5000 and Rs.10000. One can buy any number of certificates as he or she want. So, minimum investing amount is Rs.100 but there is no limit of investment in the scheme. Previously two schemes were available namely NSC VIII (for 5 years) and NSC IX (for 10 years) but currently only NSC VIII is available and that means we can invest for five years under the scheme. When the certificates mature you can go the branch of the Post Office for claim from where you purchased the same but you can claim from any branch if you can confirm your identity.
The interest rate is revised each year in the month of April but Government can also revise it more frequently in the coming years to make the scheme more attractive investment option. Currently NSC is offering 8.00% interest compounded yearly. Although the amount will remain invested till its maturity, you can always check the website of India Post for the current interest rate update. Let’s say you have purchased a NSC of denomination of Rs.10,000 after 30th September, 2016. The certificate will be matured after 5 years. The maturity proceed will be Rs.14,693.28.
As you can see the interest rate is attractive and can grow your money safely and rapidly. The tax benefit makes the scheme even more desirable. As I was discussing earlier there is no higher limit for investment in NSC but up to a certain limit you can claim deduction on the money invested. The Section 80C of the Income Tax Act allows you to claim deduction up to Rs.150000 in a year. The tax deduction is also available for the money reinvested every year. The other tax aspect is that tax is applicable on the interest income earned from it.
Although unlike other investments like bank fixed deposits, recurring deposits TDS (Tax Deduction at Source) is not applicable on NSC. Let’s make it easy to understand a little. When you invest in a bank fixed deposit the total maturity amount usually include two things. One part of it is the principle amount you invested in the inception and the other part is the interest. Bank would deduct the tax on this interest part and pay you rest of the amount. In case of NSC, post office will pay you the whole maturity amount without deducting any tax. You can pay the tax on your own when you will file your income tax. The below table can be of some help.
| Particulars | Amount | Types of Benefit | Section of IT Act |
| When Opting for NSC | 150000 max. | Deduction | 80C |
| When Re-investing | 150000 max. | Deduction | 80C |
| ** TDS is not applicable |
The NSC certificate can be purchased from any branch of the Indian Post Office. You only need to fill up the form where the details about investing amount needs to be given along with the other basic information. A Post Office savings account can be of more help when investing and redeeming the amount because it can speed up the process a little. So, you might consider about opening one for you but that is not mandatory. Your proof of identity (POI) and proof of address (POA) need to be submitted along with the filled up form as supporting document. The payment can be made by cash, cheque and demand draft or direct from your Post Office Savings account.
After issuing the certificate by the Post Office you might want to check the same for any errors. In case the certificate is lost, a duplicate certificate can be issued. The nomination facility is also available for the investors. You can make nominee any of your family members. In case you are not around anymore, Post Office would pay the maturity amount to the nominee. Multiple nominations can also be made but only single nomination is applicable in the certificates of denominations lower than Rs.500. Nominations can be changed by the account holder anytime. A separate nomination form needs to be filled and signature of the witness is also needed. If a parent purchases a NSC certificate in the name of their minor child then no nomination facility is available. Withdrawn of amount is not permitted before the maturity date expect in case of death of the holder. Certificates can be transferred to another person.
I believe you have come to understand why exactly NSC is a lucrative instrument to invest your precious money. It cannot be a substitute of any other investment you have or you want to in coming future but no need say that it can fulfill your almost every investment need. In the one hand it gives higher interest rates compared to the other safe investments on the other hand it’s safe to invest and also allows you to claim tax deduction. It is flexible to use and change nomination, transfer or issue duplicate certificate in case you have lost the original one. The charge is nominal i.e. Rs.5. Besides it’s pocket friendly investment and there is no upper cap for investment. The certificate can be used as collateral in case you want a loan from any bank. If someone want then NSC can be used for retirement financial needs as it can be used to get pension every month. So many benefits and all of these are available within our reach. As an investor I would always prefer to invest in such a scheme and I guess the choice is also yours to be made.
