NSC INTEREST RATE

The National Savings Certificate (NSC) is a fixed income investment instrument which an individual can initiate with any post office branch. An Indian Government initiative, it is a savings certificate that encourages investors – mainly small to mid-income – to invest while benefiting from income tax exemption. A fixed-income instrument like Post Office TDs and PPF, this investment is also a low-risk and secure product. The individuals can invest in NSC from their nearest post office branch in an individual capacity, for a minor, or with another adult as a joint account. They come with a fixed maturity tenure of 5 years. There is no maximum cap on the purchase of NSCs, but only investments of up to Rs.1.5 lakhs can avail a tax deduction under Section 80C of the Income Tax Act, 1961.

NSC ELIGIBILITY

While eligibility criteria for National Saving Certificate simply require an investor to be a resident of India without any age bracket allowing individuals from all age groups to benefit from the plan. Investments in this scheme are not permitted for HUFs, Trust, or NRIs. Only Indian residents are allowed to invest in this scheme.

Who can open an NSC account?

The people eligible to open an NSC account are:

An adult
Joint Account with a maximum of 3 joint holders(adults)
A guardian on behalf of a person of unsound mind or minor.
Minors above the age of 10 years in their own name

DOCUMENTS REQUIRED TO OPEN NSC ACCOUNT

The mandatory documents to save in NSC must be taken note of. The investors should confirm the documents listed below since their submission is vital to buy an NSC.

NSC application form. (Fully Filled-in)
Any Government-issued identification proof like an Aadhaar, voter ID card, passport, driving license among others.
Address proof of the applicant like telephone or electricity bill, water bill, etc.
Passport-sized photographs of the applicant.

NSC INTEREST RATES

The NSC interest rate is subject to change periodically i.e every quarter as per the decisions made by the Ministry of Finance. The applicable NSC interest rate for Q4 of FY 2020-21 (Jan to March) is 6.8%. The NSC rate in the previous quarter (Oct to Dec) was also 6.8%. The interest on the NSC account is compounded annually. The following are the rates of interest for previous quarters :

PERIOD	INTEREST RATE (%)
Q4 FY 2020-21	6.8
Q3 FY 2020-21	6.8
Q2 FY 2020-21	6.8
Q1 FY 2020-21	6.8
Q4 FY 2019-20	7.9
Q3 FY 2019-20	7.9
Q2 FY 2019-20	7.9
Q1 FY 2019-20	8.0

FEATURES AND BENEFITS OF NSC

1. High Safety:

As the scheme is backed by the Government of India, it ensures high safety of the capital to the depositor.

2. Fixed Return:

Returns in NSC is fixed since the rates of interest offered on them are not subject to market volatility. However, it is significant to note that the interest rate on the NSC account is subject to revisions by the Indian government every quarterly in a financial year.

3. Amount:

The minimum amount for NSC stands at Rs. 1,000. The individuals can opt to invest in multiples of Rs.100 thereafter. And there is no maximum limit for investment in NSC. This makes it an ideal choice of investment for every kind of investor to make investments as per their feasibility, savings, long-term financial goals, and requirements.

4. Easy Access:

NSC Investment can be done via Post Office branches across the nation as it is readily available because of its popularity.

5. Easy Nomination:

This investment alternative also allows an investor to add nominees which in case of his/her unfortunate demise will be entitled to receive the benefits of the scheme. The nominees can be added at the time of opening the account or during the tenure.

NSC TRANSFER

NSCs can be transferred from one person to another as well as from one post office branch to another without affecting the interest accrual/maturity of the original certificate. Following are the transfer options :

Transfer from one post office to another can be made by submitting Form NC-32 at the post office branch which issued the original plan.
The transfer can also be made from one investor to another by filling out Form NC-34 at the issuing post office. This can be done only once and is only allowed under the following conditions:
In case of death of NSC holder to nominees or legal heir.
In case of death of NSC holder to joint holders.
Order by the court.
Pledging of the account

LOAN AGAINST NSC

An investor may be eligible to obtain a loan against his/her NSC investments subject to some key T&C as follows:

Only Indian residents can apply for a loan against NSC
A few leading public and private-sector banks currently offer this facility
The margin applicable to loan against NSC depends on the time remaining until expiry
Returns offered on NSC investment varies based on the bank offering the loan and individual loan applicant
The loan period equals the residual maturity of the NSC used as collateral

NSC PREMATURE CLOSURE

The premature closure of the NSC account is not allowed before the completion of its maturity tenure of 5 years. However, it is permitted in some exceptional cases which are as follows:

The demise of the owner in a single account & any or all of the holders in a joint account.
If the certificate is forfeited by a pledgee being a gazetted officer.
In case the court orders the closure.

The premature closure of NSC requires certain documents which are as follows:

Original documents of NSC
Filled in NSC encashment form.
Identity proof similar to application requirements.
For minors, attestation of the guardian must also be presented.

NSC TAX BENEFITS

Investments of the amount up to Rs.1,50,000 in NSC are eligible for claiming tax deductions by the subscriber under Section 80C of the Income Tax Act, 1961. Moreover, the interest accrued on the certificates is also added back to the initial principal and qualify for a tax break as well. For example, if an investor buys certificates worth Rs.10,000, he/she is eligible for a tax rebate on that initial investment in the 1st year. But in the 2nd year, he can claim a tax deduction on the NSC that year as well as the interest accrued in the 1st year. This is because the interest is added to the original investment amount and compounded annually. The interest earned on NSC is reinvested and therefore is considered as a fresh investment while also qualifying for fresh deductions in the new financial year.

WHO SHOULD INVEST?

Investors looking for a safe investment alternative to save taxes while earning a steady return can go for this plan. The NSC offers complete capital protection and guaranteed interest to the depositors. The government has made NSC easily accessible and feasible for prospective investors by making it available in post office branches across the country. Nevertheless, like most fixed income alternatives, it cannot deliver inflation-beating returns like the tax-saving mutual funds. The NSC seems to be a very good option for investors who are looking to park their money in a very low-risk tax-saving instrument. For others looking for higher returns, they can consider investing in ELSS (Tax-saving mutual funds) schemes which will have a lower lock-in period i.e of 3 years coupled with higher potential returns on the long-term investments.

Frequently Asked Questions on NSC Interest Rate

1. Can NRIs invest in NSC?

No, Only resident Indians can invest in NSC.

2. What is the present interest rate on NSC?

The applicable NSC interest rate for Q4 of FY 2020-21 (Jan to March) is 6.8%.

3. Can investors avail of loans against NSC?

Yes, investors can avail loan against NSC.

4. What are the tax benefits of NSC?

Investments of the amount up to Rs.1,50,000 in NSC are eligible for tax deductions under Section 80C of the Income Tax Act,1961.

5. Is premature withdrawal allowed in NSC?

The premature closure of the NSC account is not allowed before the completion of its maturity tenure of 5 years. However, it is permitted in some exceptional cases as discussed above.

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