As you Know, your savings account offer very low interest rate which know one likes. Then, you feel, it’s better to make it Fixed Deposit to earn more or open a recurring deposit account to get better and higher returns.
But, do you know, there is a savings scheme which is safe and secured as it is backed by the Government of India and gives higher returns like FD and provide tax benefit under Section 80C of the Income Tax Act.
The National Savings Certificate (NSC) is a fixed-income investment scheme backed by the Government of India. It encourages small to mid-income investors to save while also providing tax benefits. In this article, I will discuss the details of NSC, its pros and cons, and why you should consider investing in it.
Aspects of National Savings Certificate (NSC)
- Interest Rate: NSC currently offers an annual interest rate of 7.7% per annum compounding annually
- Minimum Investment: You can start with as little as Rs. 1,000, and in multiple of Rs. 100 , no maximum limit.
- Lock-in Period: NSC has a fixed maturity period of 5 years.
- Risk Profile: It is a low-risk investment.
- Tax Benefit: You can claim up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
Pros of Investing in NSC
- Guaranteed Returns: NSC provides assured returns, making it attractive for risk-averse investors.
- Tax Savings: By investing in NSC, you can reduce your taxable income under Section 80C.
- Government Backing: NSCs are government-backed, ensuring safety and reliability.
- Flexible Investment Amount: There is no maximum limit on purchasing NSCs.
- Short Lock-in Period: The 5-year lock-in period allows liquidity after a relatively short duration.
Cons of NSC
- Moderate Returns: It may be a guaranteed returns but if inflation rises more than 7-8% in a year, NSC returns may not beat inflation or equity-based investments.
- Limited Liquidity: Premature withdrawals are not allowed. You have to keep your investment for 5 years only.
- Interest Taxation: The interest earned is taxable, affecting post-tax returns.
- Not for NRIs or HUFs: Only individual Indian residents can invest; NRIs and HUFs are excluded.
Who Should Invest in NSC?
- Conservative Investors: Those seeking stable returns with capital protection.
- Tax Savers: Individuals aiming to reduce taxable income.
- Risk-Averse Individuals: NSC offers safety without market volatility.
Who Should not invest in NSC?
- If you are willing to take risk and know the equity market, You should not lock your money here which yield only 7.7% of interest rate per annum.
- If you are investing in mutual funds with specific goals and likes to manage the money by yourself, you should not opt for it.
Although, every individual has its preferences and goals and risk appetite according to which an individual likes to invest in different investment plans. So, decide wisely before investing and consider all important aspects as mentioned above.
How can you invest in NSC
The National Savings Certificate (NSC) is issued by Post Office only. You can visit your nearby Post Office who offers banking services too. You will provided with the form to fill up and mention how much amount you are willing to invest in.
So, it’s very simple which you avail from your nearby Post Office.
Can you transfer NSC from one person to another
NSC may be transferred from one person to another person on the following conditions only.
- (i) On the death of account holder to nominee/legal heirs.
- (ii) On the death of account holder to joint holder(s).
- (iii) On order by the court.
- (iv) On pledging of account to the specified authority.
Try our Financial Management tool to know where and how much you should invest in.
