NSC Certificates

National Savings Certificate, popularly known as NSC is an assured investment scheme. It is a time-tested instrument providing double benefits; one is tax savings and the other is adequate returns with high safety. They facilitate long-term safe saving options for the investor. NSCs are a good investment optionfor salaried class people, businessmen as well as government employees. When you buy a NSC for a particular value, the interest compounded is returned along with the principal amount only after the maturity. It is a cumulative scheme wherein the interest is reinvested. The duration for an NSC is 6 years. Owing to it being time-bound, NSCs have low liquidity.

NSCs are available at all post offices across the country. They are issued by the Department of Post. Many middle class people in the country buy NSCs for saving tax as well as to earn decent return on their investment. Though NSC has much competition from other investment options like shares and mutual funds, yet it is highly popular owing to its respectable returns which are government guaranteed as well as tax-exempt.

Interest and Returns

NSC attracts interest rate of 8% per annum compounded half-yearly. Because of compounding, the effective rate of interest comes to 8.16%. NSCs are under a cumulative scheme and the entire interest earned every year is reinvested. It is paid along with the principal amount only after the maturity of the certificate. For example, if a person invests Rs. 10,000 in NSC today, he will receive Rs. 16,010 after 6 years.

Features of National Savings Certificate

• Pre-mature encashment is not permissible.
• Reinvestment of the annual interest earned.
• Post office savings account interest benefit for 2 years, if amount is not drawn at maturity.
• Reinvestment of amount after maturity is allowed.
• Loan can be availed against the security of the certificate.
• Nomination facility available.
• Transferable from one Post office to another.
• Transferable from one person to another.
• Duplicate Certificate issued in case the certificate is lost, stolen, mutilated or defaced.

Types of NSCs and Eligibility

Any adult individual can buy NSC for himself or on behalf of a minor. Two adults can jointly buy the certificate. Even a trust can buy NSCs. There are basically 3 types of certificates that can be bought by individuals:

Single Holder Type Certificate: This certificate can be bought by an individual in his name or on behalf of minor, or a trust.

Joint 'A' Type Certificate: this certificate is issued to 2 adults jointly and is payable to both holders jointly or to the survivor.

Joint 'B' Type Certificate: This certificate is issued to 2 adults jointly payable and is payable to either of the holders or to the survivor.

How and Where to Apply

NSCs can be purchased at authorized post offices and all head post offices across the country. A person can apply for an NSC in a prescribed manner at any of the post offices. NSC can be applied for in person or through an agent. Agents for this purpose are active in every nook and corner of the country. NSCs are available in denominations of Rs. 100, Rs 500, Rs. 1000, Rs. 5000, & Rs. 10,000. Minimum purchase is for Rs. 100 and there is no maximum limit to the purchase of NSCs. A person can invest as much as his budget allows. Payment for NSCs can be made in cash or by a locally executed cheque or order or through a demand draft in favor of postmaster. A duly signed withdrawal form along with passbook to enable withdrawal from savings account of post office could also be used as a payment mode. Also payment can be made by surrendering a matured old certificate discharged as ”Received payment through issue of fresh certificate vides application attached.”

Encashment

The NSC can be encashed at any registered or authorized post office. The authority needs to be satisfied with the identity of the person presenting the certificate. On receipt of the amount, the receiver signs the back of the certificate as a proof of receipt. The NSCs can also be encashed through banks or by transferring them to the desired post office.

If the certificate is purchased on behalf of a minor, and at the time of maturity the minor has attained the age of adult, then that recent adult needs to sign the certificate. The signature needs to be attested by the person who bought the certificate in his behalf or by the postmaster.

The maturity period of NSC is 6 years. Generally pre-mature encashment is not allowed but in cases like death of the holder, forfeiture by the nominee or court’s order, the NSC can be encashed prematurely.

Tax benefits

Deposits in NSCs up to Rs. 1 lakh can be availed as deduction under Section 80C of the Income Tax Act. The annual interest earned is deemed to be reinvested and thus qualifies for the deduction under Section 80C.

WHO CAN PURCHASE NSC:

• An adult in his own name or on behalf of a minor,
• A minor,
• A trust,
• Two adults jointly,
• Hindu Undivided Family.

WHERE AVAILABLE

Available for purchase/issue at all Post Offices in India.

MINIMUM PURCHASE VALUE

The minimum amount of investment under NSC is Rs 100/-

MATURITY OF NATIONAL SAVINGS CERTIFICATE

Period of maturity of a certificate is six Years.

NOMINATION / TRANSFERABILITY:

• Nomination facility is available.
• Certificates can be transferred from one post office to any other post office.
• Transfer from one person to another person permissible in certain
  conditions.

DENOMINATION / DEPOSIT LIMITS :

Certificates are available in denominations (face value) of Rs. 100, Rs.
500, Rs. 1000, Rs. 5000 & Rs. 10,000.

There is no maximum limit for purchase of the certificates.

INTEREST/MATURITY VALUE :

• Interest is available on this scheme @ 8%, compounded half-yearly
• With effect from 1st March, 2003, Maturity value a certificate of Rs. 100
  denomination is Rs. 160.10.
• Maturity value of a certificate of any other denomination shall be at
  proportionate rate.
• Interest accrued on the certificates every year is liable to income tax but
  deemed to have been reinvested.

PREMATURE ENCASHMENT OF NSC:

Premature encashment of the certificate is not permissible except at a
discount in the case of death of the holder(s), forfeiture by a pledgee and
when ordered by a court of law.

PLACE OF ENCASHMENT/DISCHARGE ON MATURITY :

Can be encashed/discharged at the post office where it is registered or any other post
office.

INCOME TAX RELIEF :

• Income Tax rebate is available on the amount invested and interest accruing every
  year under Section 88 of Income tax Act, as amended from time to time. [under Sec 80C]

• Minimum investment Rs. 500/- No maximum limit.
• Rate of interest 8% compounded half yearly.
• Rs. 1000/- grow to Rs. 1601/- in six years.
• Two adults, Individuals, and minor through guardian can purchase.
• Companies, Trusts, Societies and any other Institutions not eligible to purchase.
• Non-resident Indian/HUF can not purchase.
• No pre-mature encashment.
• Annual interest earned is deemed to be reinvested and qualifies for tax rebate for first 5 years under section 80 C of Income Tax Act.
• Maturity proceeds not drawn are eligible to Post Office Savings account interest for a maximum period of two years.
• Facility of reinvestment on maturity.
• Certificate can be pledged as security against a loan to banks/ Govt. Institutions.
• Facility of encashment of certificates through banks.
• Certificates are encashable any Post office in India before maturity by way of transfer to desired post office.
• Certificates are transferable from one Post office to any Post office.
• Certificates are transferable from one person to another person before maturity.
• Duplicate Certificate can be issued for lost, stolen, destroyed, mutilated or defaced certificate.
• Nomination facility available.
• Facility of purchase/payment to the holder of Power of attorney.
• Tax Saving instrument - Rebate admissible under section 80 C of Income Tax Act.
• Interest income is taxable but no TDS
• Deposits are exempt from Wealth tax.

Regards

Devendra P Kulkarni

I have purchased NSC in the name of my daughter and she is minor;

On NSC Certificate it's shown only my daughter name along with her date of birth.

Can i take rebate u/s 80C on it ?

no you can not take since its on your daughter’s name….

Originally posted by : bhupendra
	I have purchased NSC in the name of my daughter and she is minor; On NSC Certificate it's shown only my daughter name along with her date of birth. Can i take rebate u/s 80C on it ?

if the money outflow is from your accounts ( cash not considered good) for purchase of such NSC, and signed by yourself as natural guardian, then u can claim 80C benefit, otherwise not.

Form for purchase of NSC signed by me, on certificate my photograph pasted along with stamp of post office.

That means you will signed as guardian otherwise visit post office and ask to them is they place your name as guardian if yes than you could take deduction…