NSC Scheme: National Savings Certificates (VIII-Issue): Benefits, Eligibility

NSC Scheme is one of the reliable and popular tax-saving investment schemes in India. This scheme is managed by the Department of Posts and authorized banks and it is a part of the small savings instruments portfolio aimed at encouraging a savings culture among resident Indian citizens. The NSC Scheme assures capital protection, as it is backed by the central government. Also, it ensures a guaranteed return and a fixed maturity period of five years. 

The popularity of the scheme stems from its dual benefits while securing high returns and substantial NSC tax benefits. All investments under the scheme are channelled into the National Small Savings Fund. 

NSC Scheme Overview

National Savings Certificate (NSC) is one of the most popular fixed-income small savings schemes of India. It is designed to offer steady returns with sovereign security. It is preferred by investors who are looking for safe investment options with benefits of tax savings. The table below provides key NSC scheme details for the current financial period:

What is NSC Scheme?

National Savings Certificates (VIII-Issue) Scheme is a secure and low-risk financial instrument. The purpose of the scheme is to promote savings and offer tax advantages to residents of India. Upon investment, the investor receives a physical or electronic certificate of deposit. 

The NSC interest rate is fixed by the Ministry of Finance quarterly that is why the returns under this scheme are guaranteed. However, once an investor purchases a certificate, the rate prevailing at the time of purchase remains constant for the 5-year tenure of that specific certificate. The interest generated is compounded yearly. It allows the investment to grow over the lock-in period with a substantial NSC maturity amount.

Key Benefits of NSC Scheme

NSC Scheme offers multiple advantages that make it an attractive option for conservative investors who are focused on guaranteed returns and tax planning. 

Guaranteed Returns: NSC is a scheme backed by the government that offers guaranteed returns and provides financial security.

Significant Tax Benefits (Section 80C): The principal amount invested up to ₹1.5 Lakh qualifies for a tax deduction under Section 80C. Furthermore, the interest accrued and deemed reinvested for the first four years is also eligible for the same deduction. This is one of the most compelling NSC tax benefits.

Annual Compounding: The interest is compounded annually. It means the interest earned each year is added to the principal and allows the money to grow at an accelerating pace.

Low Minimum Investment: The scheme is highly accessible, with a minimum investment requirement of only ₹1,000. This way it becomes suitable for all income groups.

Loan Collateral: NSC certificates are widely accepted by banks and Non-Banking Financial Companies (NBFCs) as collateral or security against secured loans.

Nomination Facility: Investors have the option to nominate a family member (even a minor) to receive the NSC maturity amount in the event of their unfortunate demise.

Eligibility Criteria for NSC Scheme

The investment in NSC is open to individual residents of India. The applicant must fulfill certain criteria for NSC eligibility. Here is the eligibility criteria for NSC Scheme:

NSC Scheme Ineligibility/Disqualification Criteria

Not everyone is permitted to invest in the National Savings Certificate (NSC). The government has clearly defined categories of individuals and entities who are restricted from purchasing new NSC certificates. These restrictions ensure the scheme remains aligned with its purpose of encouraging small savings. The scheme specifically restricts certain entities and individuals from investing:

• Non-Resident Indians (NRIs): NRIs cannot purchase new NSC certificates. (However, a resident who becomes an NRI before maturity can continue to hold the certificate until maturity).

• Hindu Undivided Families (HUFs): HUFs are not permitted to invest in NSC.

• Trusts: Except for certain registered trusts, investment by trusts is generally prohibited.

Documents Required for NSC Scheme Application

To purchase the certificate, the applicant must complete the Know Your Customer (KYC) process. Here is the list of some important Documents Required to know how to buy NSC:

• Completed Application Form: Prescribed NSC Application Form (Form-1 or Form-A, depending on the purchasing channel).

• Identity Proof: Copy of PAN Card (Mandatory for NSC purchase), Aadhaar Card, Passport, Voter ID, or Driving Licence.

• Address Proof: Aadhaar Card or any utility bill (Electricity, Telephone) or Bank Passbook showing the address.

• Photographs: Recent passport-size photographs of the applicant(s).

• Payment: Cash, cheque, or Demand Draft for the desired investment amount.

How to Buy NSC?

The procedure to purchase the National Savings Certificate is simple and can be completed either offline at a post office or an authorized bank or online through internet banking facilities.

Option 1: Offline Purchase (Post Office/Bank)

1. Visit the Center: Locate the nearest Post Office branch or an authorized bank (public sector or major private bank) that offers the scheme.

2. Obtain Form: Request the NSC application form (Form-1 or Form-A) from the counter.

3. Fill and Submit: Accurately fill in the form with personal and investment details. Attach all necessary documents (ID, address proof, and photographs).

4. Make Payment: Deposit the investment amount using cash or cheque.

5. Verification: The authority verifies the KYC details and processes the application.

6. Collect Certificate: Upon processing, the Post Office/Bank will issue the National Savings Certificate (NSC) either in a physical certificate form or in an electronic/passbook mode.

Option 2: Online Purchase (Post Office Internet Banking)

1. Login: Log in to your Post Office Savings Account (POSA) Internet Banking portal.

2. Navigate to NSC: Go to the 'General Services' or 'Small Savings Schemes' section.

3. Open NSC: Select the option to open an NSC account (VIII-Issue).

4. Enter Details: Enter the deposit amount, select the debit account (POSA), and nominate if required.

5. Confirm: Review and confirm the transaction. The deposit amount will be debited, and the NSC account will be opened instantly.

6. View E-Certificate: The details of the certificate are available in the online portal, or an e-certificate is generated.

Post Office/Bank Guidelines and Key Implementing Institutions for NSC Scheme

NSC Scheme is uniformly implemented across India based on certain guidelines which are set by the Ministry of Finance.

Key Implementing Institution: The Department of Post, under the Ministry of  Communications, acts as the primary service provider for the scheme. The Ministry of Finance is responsible for setting and revising the interest rates quarterly. 

NSC Scheme Features and Advantages

The table below summarizes the major features of the NSC and the resulting advantages for the investor looking at the nsc maturity amount.