General, Investment, Tax Savers

NATIONAL SAVINGS CERTIFICATE (NSC)

national-savings-certificate-nsc

National Savings Certificates are the government bonds used for small savings and income tax savings and it is a part of Indian Postal Service (India Post).It is one of safest means of investment and this is specially designed for salaried employees and businessmen. NSCs produce a fixed income like fixed deposits. One can invest in this scheme up to 10 years. There are two types of NSCs that is NSC VIII and NSC IX.A person can invest in NSC VIII for 5 years and in NSC IX for 10 years. Government of India sets a fixed rate of interest for NSC.The present interest rate applicable on National Savings Certificate is 8.5%for the NSCs bought for 5 years term and 8.8% of interest rate for NSCs of 10 years term. These interest rates will remain fixed for the whole term of investments.National savings Certificates can be bought jointly on behalf of minors or individually at all post offices.

Tax benefits are also offered by the NSCs and the interest earned from them is not paid to the investor but it is reinvested. It also allow a income tax rebate under sec 80C of Income Tax act 1961.A brief introduction of sec 80C of Income Tax Act: . As per the rules and regulations of Sec 80C, the person can have a deduction of Rs.1.5 lakhs for one Financial Year. A deduction of Rs.1.5 lakhs can be claimed from the taxable income and that can be saved. The investment is made in and expenses over them etc can be claimed for Income Tax paid in excess by including these investments in taxable income.

Interest calculation on NSC:

National Savings Certificates interest rate is calculated on the basis of date of purchase of NSC ,total amount invested ,total years completed after purchase and the applicable rate of interest etc.Based on results one can calculate the income tax rebate.

The minimum investment of National Savings Certificate is Rs 100can claim the tax benefit of Rs.100000 the risk is low and the lock in period is 3 years only.

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The following are the benefits offered by the National Savings Certificate:

  • NSCs offer attractive interest rates and one can earn up to 8.8%of interest.
  • Investment up to 5 to 10 years can assure good returns.
  • Loans can also be sanctioned against NSCs.
  • Any number of NSCs can be bought according to one’s convenience.
  • The greatest advantage of NSCs is that it can be transferred to anyone.

Features: The following are the features of National Savings Certificate

Tenure:

The term of NSC VIII is 5 years and NSC IX is 10 years.

Investment:

The investment can be made with just Rs.500.

Denomination:

NSC denominations can be issued of Rs 100/500/1000/10000 etc.

Interest:

The interest rate is 8.5% to 8.8%.

Tax Benefit:

This can allow a tax benefit up to Rs 1,50,000

Transferability:

It can be transferred from one person to other person for only once after the date of issue.

Online facility:

One can invest in this through online thus it provides a great factor of convenience.

Security:

Investors can avail loans by issuing NSCs as collateral.

Withdrawal of NSC:

Withdrawals can be of two methods that is premature withdrawal and withdrawal after maturity. Premature withdrawal can be allowed only by the following criteria:

  • Death of holder
  • Order by court
  • Forfeiture by a government officer.

Withdrawal after maturity that is completion of 5 years for NSCVIII and 10 years for NSC IX.

The following are the documents needed and formalities to be fulfilled for the encashment are:

  • NSC encashment form is to be submitted.
  • Original NSC certificate.
  • Identity proof.
  • Signature of the nominee on the certificate is also needed.
  • If the investor is a minor then attestation is must.
  • In case of no nominees the legal heir can proceed for encashment by submitting the form SB84.
  • In case of death of the account holder the nominee can be eligible for encashing the NSC by submitting

Annexure1: claim settlement application from a post office

Annexure2: Claim settlement application.

 

 

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CA Rachit Jain

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