National Saving Certificates (NSC)

National Saving Certificates are saving bonds issued by the Government of India for small savings. NSCs are part of the postal saving system. There are two issues of NSC that are in operation currently. NSC VIII issue has 5 years of maturity period and NSC IX issue has 10 years of the maturity period. The interest rate on NSC VIII is 6.8% per annum whereas interest rate on NSC IX issue is 8.8%.

The rate of interest shall remain the same for the whole tenure of investment. Interest on NSC is liable to tax, but no tax is deducted at source. However, if the interest earned is reinvested in the NSC, the taxpayer can claim the tax rebate under section 80 C of the Income Tax Act, 1961. The interest first needs to be shown as a part of income under the head income from other sources and later can be claimed as a deduction under section 80 C.

Features

• Min. 100/- and no max. limit.
• Certificate shall be issued on Passbook or exclusive e-mode.
• A single holder type certificate can be purchased by an adult for himself or on behalf of a minor.
• Joint 'A' Type certificate may be issued to two adults payable to both the holders jointly or to the survivor.
• Joint 'B' Type certificate may be issued to two adults payable to either of the survivor.
• Rate of interest is notified by the government from time to time on quarterly basis and is calculated on half yearly compounded basis.
• Current Rate of Interest Payable at maturity value.
• Loan facility available by pledging with the banks.
• The deposits as well as interest accruing annually but deemed to have been reinvested qualify for deduction u/s 80-C of I.T. Act.
• Interest accrual on investment of 100/- and in proportion for other denominations, on yearly basis for income tax purpose.
• Non Resident Indians are not eligible to purchase the National Savings Certificates: Provided that if a resident, who subsequently becomes Non Resident Indian during the currency of maturity period, shall be allowed to avail the benefits of the certificates on maturity on a Non Repatriation Basis.

 Identification of Account holders

• Provided that where Aadhaar number has not been assigned, the depositor shall submit proof of application of enrolment for Aadhaar.
• Provided further that every depositor under this rule who has not given his Aadhaar number at the time of application for such deposit shall submit his Aadhaar number to the Post Office Savings Bank concerned, on or before the 31st day of December, 2017.

National Savings Certificate (NSC) issue IX, which had a term of ten years has been discontinued. The move was approved and notified by the Ministry of Finance on 1 December 2015 and the postal department stopped issuing these certificates 20 December 2015 onward. Observers believe that the instrument was discontinued because it locked-in the government into a long-term commitment in a falling rate regime.