National Savings Certificates (VIII and IX Issue) Summarized

National Savings Certificate (NSC) is an instrument offered by Government of India with a purpose to encourage savings. It offers tax benefit under 80C, comes with a lock-in and can be pledged to take a loan. However, the interest accrued on NSCs is taxable.

The Scheme is specially designed for Government employees, businessmen and other salaried classes who are Income Tax assesses.

National Savings Certificate

NSCs was extremely popular in its earlier version among investors seeking long term investment who wanted their money to compound. Now there are two versions of the instrument to provide multiple opportunities for investor.

NSC VIII Issue

  • No maximum limit for investment.
  • No tax deduction at source.
  • Certificates can be kept as collateral security to get loan from banks.
  • Investment up to INR 1,00,000/- per annum qualifies for IT rebate under section 80C of Income Tax Act.
  • Trust and HUF cannot invest.
  • Duration is for 5 years
  • Rate of interest 8.60%.
  • Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 152.35 after 5 years.

NSC IX Issue

  • No maximum limit for investment.
  • Duration is for 10 years.
  • INR. 100/- grows to INR 234.35 after 10 years.
  • Minimum INR. 100/- No maximum limit available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
  • A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor.
  • Rate of interest 8.90%.
  • Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 238.87 after 10 years.

Government will announce interest rates before April 1 of every financial year. As these instrument is offered by government, they are considered to be highly secured.

NSCs are transferable from one post office to another. Also, there is a facility of duplicate certificate in case of lost, stolen, destroyed, mutilated or defaced certificate.

Taxation:

To avail tax benefit it is important to declare the accrued interest on NSC on a yearly basis in your tax return. Interest earned on the NSC is taxable but no TDS. Investments in certificate is compounded semi-annually.

Where and how to buy?

National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at most post offices in the country in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000. NSCs can also be transferred from one person to another by paying a small fee. They can also be transferred from one post office to another.

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  • V>S> OHOL

    Invested 60,000 Rs. in NSC5 years. How much will be tax benefit.

    • thesanyamjain

      Deposits up to Rs.1 lakh (in your case Rs.60,000) in NSC qualify for Deduction Section 80C of the Income Tax Act. Accrued interest on NSC also qualify for deduction u/s. for first five years.

      NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year’s interest for the first 5 years is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year’s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount.

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