Monday, March 11, 2024

Understanding the National Savings Certificate (NSC)

The National Savings Certificate (NSC) is a fixed income investment scheme that you can open with any post office in India. It's a government-backed savings tool that provides both a safe investment avenue and tax benefits under Section 80C of the Income Tax Act, making it an attractive option for individuals looking to combine savings with tax planning.

Key Features of NSC:

  • Interest Rates: The NSC currently offers an interest rate of 6.8% per annum, which is compounded annually but payable at maturity. This rate is subject to review and revision by the government every quarter.

  • Investment Tenure: The NSC comes with a lock-in period of 5 years.

  • Minimum and Maximum Investment: The minimum investment amount is INR 1,000, and there's no maximum limit. However, tax benefits under Section 80C are capped at INR 1.5 lakh per annum.

  • Tax Benefits: Investments up to INR 1.5 lakh in NSC are eligible for deduction under Section 80C. Although the interest on NSC is taxable, it is considered reinvested each year (except the last year) and also qualifies for Section 80C benefits.

  • Safety: Being a government scheme, NSC is considered a very safe investment.

  • Transferability: NSC can be transferred from one person to another before the maturity period under specific conditions.

Modes of NSC:

  • Single Holder Certificate: Issued to an individual who can appoint a nominee. Decisions and management of the certificate rest solely with the holder.

  • Joint A Type Certificate: Issued to two adults with the maturity amount payable to both. Requires joint decisions and signatures for any changes.

  • Joint B Type Certificate: Similar to Joint A but the maturity proceeds are payable to only one of the holders.

Forms Required for Investing in NSC:

  • Form 1: Application form for purchasing NSC at post offices.

  • Form 2: Nomination form, if the nominee was not appointed at the time of purchase or if there's a need to appoint one later.

  • Form 3: Change of Nomination form for altering nominee details after the certificate has been issued.

Nomination in NSC:

Nomination is crucial in NSC for a smoother transfer of benefits in the event of the holder's demise. It ensures that the NSC proceeds are promptly paid to the nominee without legal hassles. Nomination can be made at the time of purchasing the NSC or later through Form 2, and changes to the nominee can be made using Form 3.

Premature Withdrawal:

NSC investments are generally locked for 5 years. Premature withdrawals are only allowed under exceptional circumstances such as the death of the holder or forfeiture by a pledgee being a Gazetted Government Officer.

Shifting or Transferring NSC:

  • Form NC-32 is required for transferring an NSC account from one post office to another, which is often necessitated by the holder's relocation.

  • Ownership Transfer: NSC can be transferred to another person under specific conditions, facilitated by completing Form NC-34 Annexure 2, with various stipulations including the original holder's consent and verification of the child's benefit if transferred on behalf of a minor.

Charges and Duplicate NSC:

A nominal fee of Rs 5 is charged for services like transferring ownership, issuing duplicate certificates, and other administrative actions. For lost or damaged certificates, Form NC-29 enables the issuance of duplicates, ensuring the investor's security is maintained.

NSC vs. FD and PPF:

When compared to Fixed Deposits (FD) and Public Provident Fund (PPF), NSC offers a competitive interest rate with the added advantage of being a low-risk, secure investment. It provides tax benefits under Section 80C, and unlike PPF, it has a shorter lock-in period of 5 years. However, it lacks the liquidity of FDs and the long-term growth potential and tax-free earnings of PPF.


The National Savings Certificate stands out as a solid investment choice for individuals seeking a risk-free avenue to save money while also gaining tax advantages. Its features cater to a wide range of financial goals, from short-term savings to long-term wealth accumulation, making it a versatile tool in an investor's portfolio.