Save tax, earn high interest with zero TDS by investing in NSCs

Save tax, earn high interest with zero TDS by investing in NSCs

Investment in NSC is 100% safe and qualifies for tax saving option under Section 80C. The most lucrative aspect is Interest earned on NSC also qualifies for Section 80 tax benefit.

Do you know that in this era of falling Interest Rates, National Saving Certificates offers a high Interest rate up to 8.8% with Zero TDS on it? Also investment in NSC is 100% safe and qualifies for tax saving option under Section 80C. The most lucrative aspect is Interest earned on NSC also qualifies for Section 80 tax benefit. Here is everything about NSC, right from how to invest in NSC and its Tax treatment

What is National Savings Certificate (NSC)?

National Savings Certificate or NSC is an investment option introduced by the Government of India in order to motivate individuals to indulge saving habits and channelize in the correct direction. NSC is issued via Post Offices as this agency makes it accessible to the common people. The sum total created through these deposits is utilized for the country’s growth and development.

It works like FDR wherein individual invests certain sum of money for 6 years or 10 years and he gets an interest each year. This interest gets re-invested and thus the individual gets interest on interest.

NSC’s in India is considered as the ‘highly secured’ and reliable investments as it not only provides an avenue for safe investment but also offers tax benefits u/s 80C at the time of

Investment

During the life of investment

Therefore, there is no such restriction for investment in NSC.

Who can buy NSC?

a. Any individual whether singly or jointly along with other adult can buy NSC

b. A guardian or parent on his or her minor’s behalf can buy NSC

Who are not eligible to buy NSC?

a. Hindu Undivided Families (HUF’s) as well as Trusts cannot invest in NSC

b. Non-Resident Indians (NRI’s) are also not eligible to buy NSC. On the other hand, if an individual was an Indian Resident while buying NSC and becomes an NRI during maturity period, then he or she is eligible to hold this certificate till its maturity

Where to buy NSC?

NSC’s are certificates that are issued by the Department of Post, Govt of India and are accessible at almost all the post offices of the country. The Certificate may be relocated from the post office to the other post office provided you make an application in approved format at any of the two offices.

The payments for purchasing of NSC can be done to the P.O. in any one of the following modes mentioned underneath:

1. Cash

2. By putting forward an application for fund withdrawal from the P.O. Savings Bank Account

3. Cheque, Demand Draft or Pay Order drawn in goodwill of the Postmaster

4. By giving away an old matured certificate, thereby stating at the back of the certificate given away ‘Received payment through issue of fresh certificate, vide application attached

The Postmaster must issue new Certificate of NSC on that spot if possible or must issue provisional receipt to the buyer, which may later on be exchanged with NSC at the time of issue.

Types of NSC and their Rate of interest

National Saving Certificates or NSC offers a very good return on investments. There are currently two types of NSC available.

These are NSC VIII issue and NSC IX issue.

1. While the NSC VIII issue offers 8.50% of interest, investors get a hefty 8.80% of interest with NSC IX issue.

2. With NSC VIII issue, the maturity value of certificate of Rs 100 will be Rs 151.62 after 5 years.

3. With NSC IX issue, the maturity value of certificate of Rs 100 will be Rs 234. 35 after 10 years.

4. It is important to note that in case of NSC the interest is compounded half-yearly and therefore interest is reinvested.

Various Kinds of NSC

Three types of NSC certificates are there which are mentioned below:

1. Single holder Kind Certificate: This NSC is subjected to the holder himself / herself or maybe on minor’s behalf

2. Joint A Kind Certificate: This NSC is issued subjected for 2 adults and allocated to both holders mutually

3. Joint B Kind Certificate: This NSC is subjected jointly for 2 adults and allocated to either of them

The minimum sum that can be invested in NSC is Rs 100 and moreover there is no maximum limit on the sum that ought to be invested on the same.

What to do if NSC is lost?

If NSC is misplaced, stolen, smashed, mutilated or defaced, the lawful owner of the certificate can easily apply for the issue of a duplicate certificate together with the compulsory information in Form NC-29 to the Post Office where the necessary certificate is already registered or some other Post Office which will eventually move the appeal to the Post Office where that particular certificate has been issued.

Such type of application for issuance of duplicate certificate must be accompanied with the statement mentioning the required particulars like number, sum total, date of the certificate and the circumstance attending such type of loss, theft, destruction or mutilation. Apart from this, if the officer-in-charge of the Post Office is satisfied regarding the reason of loss or destruction of NSC certificate, he or she must issue a duplicate NSC certificate to the candidate possessing an indemnity bond in prescribed form with just one or more approved sureties or with bank guarantee.  Just a fee of Rs 5 will be charged from them for issuing a duplicate certificate.

Premature encashment of NSC

Premature encashment/redemption of NSC certificate is not allowed except in the cases mentioned below.

· On the demise of the holder or holders if it is the case of joint holders

· On Forfeiture by a guarantee being Gazetted Government Officer when that guarantee is in the compliance with the rules

· When the order comes by Court of Law

If the NSC Certificate is encased for the reasons mentioned above within one-year time from the issue date, the encashment must be made at the face value devoid of any interest. On the other hand, if encashment is made after one year, then interest will be payable in these cases but this encashment will be done at discount.

Tax Treatment of NSC

The deposit of up to Rs 1.50 lakhs in NSC will qualify for deduction u/s 80C. Besides, accrued interest on NSC also qualifies for deduction under the same section.

Interest on NSC is also taxable. However, since this scheme is cumulative (for instance, interest amount is not paid to the investor and it keeps on accumulating); every year the amount of interest is considered to be again invested in NSC. Since, it is deemed to be reinvested, the certificate qualifies for new deduction u/s 80C, thereby making it tax-free.

 Only the interest of the final year when the NSC matures does not acquire tax deduction since it does not get reinvested, instead it is paid to investor along with the interest amount of earlier years plus the capital amount.

Happy Investing