NSC in Post Office: Features, Interest rates, and Account Opening Process
National Savings Certificates (NSC) is a savings cum investment scheme backed by the Government of India. This fixed income investment option is available at all post offices, which encourages subscribers to invest while saving on income tax. Because of the government backing, this investment scheme falls under the category of low-risk investment schemes.
Suppose you have a surplus amount in your savings bank account and wish to invest in a low-risk plan with guaranteed returns. In that case, National Savings Certificates will be an ideal option.
The rate of interest offered by the NSC scheme is higher than most fixed deposit schemes of various banks. While there is no maximum limit on the purchase of NSCs, only investments of up to Rs.1.5 lakh can earn you a tax deduction under Section 80C of the Income Tax Act. Lastly, the option of transferring your account or premature withdrawal is also available, subject to specific criteria.
So, let us now look at the features, interest rates, and account opening process of the NSC post office scheme.
NSC Scheme in Post Office
The National Savings Certificate-VIII Issue, released by the Government of India, dictates the current practices regarding NSC. Let us go through the features of NSC step-by-step:
Features of NSC Scheme in Post Office
- Eligibility: Any Indian resident citizen, above 10 years of age, can open an NSC account. Legal guardians or parents on behalf of a minor can make investments in a National Savings Certificate. However, Hindu Undivided Families, Trusts, and Non-resident Indians are not allowed to invest in National Savings Certificates.
- Tenure: The investment tenure in the NSC scheme is of five years, with the term starting from the date of deposit.
- Investment Amount: The minimum investment limit is Rs. 1,000, and in multiples of Rs. 100 thereof. There is no maximum investment limit.
- Number of Accounts: You can open any number of accounts under the NSC scheme at a post office.
- Joint Account: You can open a joint account in the NSC scheme with up to three adults listed as holders.
- Interest: The interest you earn on your investment gets compounded and reinvested by default.
- Taxation: Your NSC investment in the post office is tax-exempt up to Rs. 1,50,000 under Section 80C of the Income Tax Act, 1961.
- The interest on NSC for the first 4 years can also be claimed as an NSC investment deduction under Section 80C. This is because the interest is reinvested in NSC. The interest earned in the last year, becomes available in the hands of the investor and is taxed under the head “Income from Other Sources”.
- Loan Facility: You can pledge or transfer your investment to another owner as security. For this, you must submit an application form along with the acceptance letter of the pledgee.
- Nomination Facility: NSC schemes provide the option of appointing family members as nominees. The corpus will go to the nominees in the event of your untimely demise.
- Transfer Facility: NSC can be transferred from one post office to another. It can also be transferred to another individual, so that in the same certificate, the name of the old owner is rounded and the name of the new owner is mentioned.
Rate of interest of NSC in Post Office
From April 1, 2020, the rate of interest offered by the NSC scheme is 6.8%. It is compounded annually and payable upon maturity.
However, it must be remembered that the post office NSC interest rate is subject to change periodically as per announcements by the Ministry of Finance. The current post office NSC interest rate is mostly higher than the FD interest rates offered by banks.
How to Open an NSC Account in Post Office
There are two ways to open an NSC account in the post office.
- Visit the nearest post office to request an application form. Alternatively, you may download the application form from the Department of Post (DoP) website.
- Attach your recent passport-size photograph with photocopies of the necessary documents to the duly-filled form.
- Aadhaar card, PAN card, Voter ID and Passport are accepted as identity and address proof.
- Submit the investment amount through cash or cheque.
Your NSC account will be opened upon successful processing of your application.
A post office savings account with active internet banking is mandatory to open an NSC account online. Here is a detailed walkthrough:
- Log in to internet banking through the Department of Post (DoP) website.
- Navigate through the ‘General Services’ section and select the ‘Service Requests’ tab. Under this tab, select the ‘New Requests’ option.
- Among the options that pop up, click on the ‘NSC Account – Open an NSC Account (For NSC)’.
- Choose the investment amount and select the linked savings account from where the amount will get debited. The minimum amount you need to invest is Rs. 1,000, and you can enter the amount in multiples of Rs. 100.
- Read and accept terms and conditions by clicking on ‘Click Here’
- Enter the correct transaction password and submit the application.
Upon successful processing of your application, your account will be opened. After logging in, you can view the details of your NSC account under the ‘Accounts’ section.
Post Office NSC Forms
Post offices have rolled out different form types under the NSC scheme, such as NC 71, NC 32, NC 34, and others, to streamline the process and make it convenient for investors. Some of the most crucial forms are listed below.
- NC 71
This form is used to open an NSC account or invest in the NSC post office scheme.
- NC 32
This form is used to transfer the account from one post office branch to another.
- NC 29
This form is utilised for availing a duplicate savings certificate if you lose or damage the original certificate.
- NC 34
This form is used to transfer the certificate from one individual to another, except for the case where the NSC has to be transferred as a form of a pledge.
- NC 41
This form is utilised for using your NSC investment as security/collateral for securing a bank loan.
NSC proves to be one of the ideal options to diversify your portfolio and explore options to invest in secure and almost-zero-risk schemes. Investment in NSC in the post office is safe and provides guaranteed returns upon maturity. This scheme is favourable if you have a fixed financial goal in the long term, such as paying education fees for your children or a down payment for a car and other property after five years. The tax-saving benefit is the cherry on top. Furthermore, NSC can act as security to help you secure a loan when you need funds urgently.
FAQs about NSC in Post Office
Can I purchase multiple NSCs? If yes, how many can I buy in a single year?
Yes, you can buy multiple NSC certificates at a post office. There is no limit on the purchase in a single year.
Can I withdraw my investment in NSC before the date of maturity?
The investment tenure for NSC is five years. Premature withdrawal is allowed under any of the following conditions:
1. The death of the account holder or any of the holders in a joint account.
2. By court order.
3. On forfeiture by a pledgee being a Gazetted officer.
Further, if an account is prematurely closed before the expiry of one year from the date of deposit, only principal amount shall be payable
Can I avail tax exemptions by investing in NSC?
You can avail of tax exemptions on investments up to Rs. 1,50,000 in the NSC schemes under Section 80C of the Income Tax Act, 1961.
What is the rate of interest for an NSC scheme?
The current interest rate offered by an NSC scheme is 6.8%, and it is compounded annually.
What is the maximum limit on investment in an NSC scheme in a financial year?
There is no maximum limit on investment in the NSC scheme in the post office in a financial year. You can invest based on your investment portfolio and financial goals.
Is investment in the NSC scheme safe?
Yes, investment in the NSC scheme is safe as it has the backing of the Government of India. The National Savings Institute provides the NSC scheme. This institute operates under the Department of Economic Affairs of the Ministry of Finance, Government of India.