New Delhi: The National Saving Certificate (NSC) is a popular post office savings programme that offers guaranteed returns as well as Section 80C tax benefits. Financial planners recommend this scheme to risk-averse investors because it maintains capital while providing a better-fixed return than other fixed-return savings schemes.
Personal finance gurus believe that NSC may be used by seniors to obtain a stable monthly income. Any individual can invest in this plan, either in his or her own name or on behalf of minors. NSCs can also be purchased jointly by two people, either jointly or survivor.
NSC: Interest rate
Every quarter, the government sets the interest rate on NSCs. The current quarter’s rate on the National Saving Certificate is 6.8 percent. If you put Rs 1000 in NSCs now at the aforesaid interest rate, your money will grow to Rs 1389 in five years. Because there is no maximum investment limit, NSCs can be purchased for any sum. So, if you put Rs 10 lakh in NSCs today, it will grow to Rs 13.89 lakh in five years.
NSC Tax benefit
Up to Rs 1.5 lakh invested in NSC each fiscal year qualifies for an income tax deduction under Section 80C of the Income Tax Act. Because interest on NSC investments is assumed to be re-invested every year, it is tax deductible up to a maximum of Rs 1.5 lakh per year because it is accrued and paid on maturity. When the NSC matures, however, the entire amount of interest earned becomes taxable in the depositor’s hands. According to financial gurus, it is appropriate for investors in the lowest income tax bracket. It should be noted that when the certificate is redeemed, no TDS is deducted.
Premature encashment of NSC
Premature encashment of NSC is only permissible in three situations: the depositor’s death, court orders, or forfeiture by a pledgee. If redeemed within one year of purchase, only the face value is paid. If the certificates are redeemed after one year but within three years of purchase, the simple interest rate applicable to the post office savings account is paid. NSCs, on the other hand, can be cashed in for a discounted value after three years of investment.