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National saving certificate as a tax saving investment


National Savings Certificate (NSC) is a tax saving investment that can be purchased from any post office by an Indian Resident. Being a fixed return and low risk Government of India-backed investment, NSC is usually preferred by risk-averse investors or those seeking to diversify their portfolio through fixed return instrument.

National Savings Certificate (NSC) Interest Rate –

The interest rate is subject to periodic change as per the decisions taken by the Finance Ministry. The applicable NSC interest rate for Q4 FY 2018-19 (January – March 2019) is 8%. It was hiked from 7.6% to 8% in October 2018. The NSC is compounded annually but payable only at maturity.

Key features of NSC are as follows –

  • NSC can be purchased at any India Post Office and maturity period is 5 years.
  • Interest rate is subject to periodic change as per Ministry of Finance announcements.
  • Minimum NSC investment is Rs. 100 with no maximum limit.
  • Principal invested qualifies for tax savings under Section 80C of the Income Tax Act, 1961 up to Rs. 1.5 lakhs annually.
  • Interest is compounded annually but paid out only at maturity without any TDS deduction.
  • Issued in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000 and Rs. 10,000.

Modes of Holding of National Savings Certificate –

The different modes of holding National Savings Certificate are as follows:

Single Holder Type certificate: Single holder certificate can be purchased by an investor for self or on behalf of minor.

Joint A Type certificate: In this case, the certificate is held by two investors with equal share of maturity proceeds.

Joint B Type certificate: This is also a joint holding certificate however the maturity proceeds are paid out to only one of the holders.


The following are the key eligibility criteria for making National Savings Certificate investments:

  1. All resident Indians are eligible to invest.
  2. Non-resident Indians cannot purchase new NSCs. However, in case of resident subscribers of NSC becoming NRI prior to maturity of certificates, such NSCs can be held till maturity.
  3. Trusts and Hindu Undivided Family (HUFs) cannot make NSC investments.
  4. Karta of HUFs can make NSC investments only in his own name.

Benefits of investing in NSCs –

  • Almost risk free investment backed by the Government of India.
  • Offers one of the highest rate of returns among fixed rate instruments.
  • Flexibility due to low minimum investment requirement of Rs. 100 without any maximum limit.
  • Easy availability at any India Post Office.
  • They can also be purchased in the name of a minor.
  • NSCs are primarily tax saving investments as the principal amount invested allows tax deduction under Section 80C up to 1.5 lakhs limit.

Investing in National Savings Certificates –

NSC can be bought from any India Post Office on submission of required KYC documents. Currently online purchase of NSC is not possible.

Documents Required –

  • Completely filled NSC Application form.
  • Recent Photograph
  • Identity proof – Adhaar/PAN
  • Address proof – Adhaar/Voter ID
  • Cash/cheque deposit of investment amount.
  • These documents can be submitted at any India Post Office to obtain NSC in applicable denominations.

Transfer of National Savings Certificate

NSCs can be transferred from one post office to another as well as from one person to another without impacting interest accrual/maturity of the original certificate.

Transfer from one post office to another can be made by filling out and submitting Form NC-32 at the post office which earlier issued the original certificate.

Transfer of National Savings Certificates can also be made from one holder to another by filling out Form NC-34 at the NSC issuing post office. This can be done only once till time of scheme maturity.

Premature Withdrawal

NSC has a lock in period of 5 years with premature withdrawal permitted only in specific cases such as –

  • On the death of NSC holder.
  • On forfeiture by a pledge who is a Gazetted Government Officer.
  • On the order of court for premature withdrawal of NSC


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