NSC Post Office Interest Rate
Several small savings schemes allow people working in different sectors to build a corpus to secure their life post-retirement. Hence, the Government of India has introduced several schemes over the years to encourage the population to save more.
The National Savings Certificate is one such initiative. The National Saving Certificates are savings bonds issued under the small saving scheme of the DoP (Department of Posts). It is an excellent choice for investors who prefer low-risk investments to diversify their portfolios.
In the past, NSC came with a ten-year maturity period. However, the new version introduced in 2019, National Savings Certificates – VIII issue, proposes a tenure of 5 years for every investor.
You can open an account under any of the following categories:
- Single Holder Account Type
Opened by an adult in their name or on behalf of a minor or an individual of unsound mind.
- Joint A-Type Account
Held jointly by up to three adults with the maturity corpus payable to all or the survivor(s).
- Joint B-Type Account
Owned by three adults with the maturity corpus payable to any one of the holders or the survivor(s).
Now that you know the tenure and account types, are you wondering about the NSC Post office interest rates? Well, no worries! Read the article to learn more about how the scheme works and the current post office interest rate on the NSC!
NSC Interest Rates For 2022
The NSC post office interest rates are set by the government and revised quarterly. Further, the interest is not subject to market fluctuations as the government backs the NSC scheme, thus guaranteeing fixed returns.The current interest rate for quarter ending December 2022 stands at 6.8%, compounded annually.
Let us explain how to calculate an NSC interest amount with the help of an example. Suppose you purchase a National Savings Certificate worth Rs. 1000. Since the investment requires a lock-in period of 5 years, you will accumulate a 6.8% interest rate in the post office, compounded and reinvested each year. As a result, the returns for each year will be as follows:
|Years||The interest amount on the certificate of Rs. 1000 denomination|
However, it is crucial to note that you will not receive any interest in case of premature exit from the scheme before the completion of the first year.
The National Savings Certificates are available in post offices and banks. Following are the steps for applying:
- Visit the nearest post office or a bank with authority to issue NSC certificates.
- Fill in the application form carefully.
- Ensure that the details are accurate and correct.
- Submit the form with the required documents for purchasing the National Savings Certificate.
- Make the payment via a cheque or cash, per your preference.
While you can download the application form online, you have to visit the post office to submit it physically. Given below are the steps to access the form digitally:
- Visit the website of the Department of Posts (DoP) at https://www.indiapost.gov.in/vas/Pages/IndiaPostHome.aspx.
- Click on the ‘Banking and Remittance’ option from the menu.
- On the next page, select ‘Post Office Savings Scheme’ under the National Pension Scheme drop-down menu.
- The page will guide you to various post office savings schemes available. Choose the ‘National Savings Certificates (NSC)’ from the list.
- A drop-down page will open. Go through the details regarding the scheme. Then, tap on the ‘Forms available’ option at the bottom.
- Now, you can download the ‘Application form for the purchase of Certificate’ from the ‘Saving Certificates’ section in PDF format. Fill out the form correctly.
- Submit it with the relevant documents at the nearest post office or empanelled bank branch.
- Lastly, make the payment via cheque or cash per your preference.
The interest rates on NSC in the post office are one of the sole reasons the scheme is in high demand. Besides the interest rate, investing in the National Savings Certificates offers some other benefits such as:
- The scheme allows you to invest a minimum of Rs. 1000. You can make further deposits in multiples of Rs. 100.
- There is no maximum limit on the certificates you can purchase. Moreover, you can increase your investment amount over time per your suitability.
- The NSC comes with a fixed maturity period. The deposit will mature on the completion of 5 years from the date of the deposit.
- Premature withdrawal options are accepted under certain conditions.
- The death of the single account holder.
- The demise of one or all of the joint account holders.
- When ordered by a court.
- Investment in NSC up to Rs. 1.5 lakhs are tax deductible under section 80C, Income Tax Act.
- It is also possible to claim an investment deduction for the interest on NSC for the first four years. This is because the interest is reinvested in NSC.
- An investor becomes eligible to receive the interest earned during the last year, i.e. year 5. It is therefore taxable under the heading “Income from Other Sources” and taxed at the individual’s tax slab rate.
- The NSC can be used as collateral to secure bank loans.
Eligibility Criteria and Document Required to Open An Account
The National Savings Certificates scheme is open to almost everyone who is an Indian resident. There is no prerequisite regarding the ages. Moreover, you can open the account on behalf of a minor or on behalf of a person of unsound mind. But, a few entities are ineligible for it under the NSC VIII issue. They are:
- HUFs (Hindu Undivided Families).
- NRIs (Non-resident Indians).
- Private and Public Limited Companies.
Further, to open an NSC account, you must keep the following documents handy:
- Filled-in application form.
- Aadhaar, PAN, Passport, Voter ID, Driving licence, etc. to verify your identity.
- Passport-sized photos.
- Valid proof of address in the form of Aadhaar, Passport, Voter ID, Driving licence, landline bill, electricity bill etc.
NSC is a lucrative investment instrument backed by the government that allows you to build a sizable corpus, thanks to stable returns. The interest rate for the current quarter (Sept 2022 – Dec 2022) is 6.8%. Hence, NSC can be an excellent choice if you are a risk-averse investor with surplus money to invest.
What are the perks of the National Savings Certificate?
The National Savings Certificates come with several benefits. Besides the fixed NSC interest rates, the scheme comes with a 5-year maturity period, with the interest rate revised quarterly. In addition, you get tax benefits on the principal amount under Section 80C of the Income Tax Act.
What is the tenure of an NSC certificate?
The lock-in period for an NSC certificate is five years. While the term cannot be extended, you can purchase new certificates after the 5-year tenure. In fact, you can purchase as many certificates simultaneously as your investment appetite permits.
Can I borrow a loan against NSC?
Yes, NSCs can act as collateral when borrowing loans. You can approach any financial banking institution for loans against NSC as security. However, the loan’s quantum varies from one bank to another, based on the NSC corpus and policies of the bank. Many banks lend loans up to 70%-80% worth of the NSC certificate. Individuals with over three years of investment generally get higher loan approvals than new investors.
Is the NSC interest rate in post offices higher than the Public Provident Fund?
No. The Public Provident Fund offers a higher interest rate than the National Savings Certificate. The Ministry of Finance sets the return rate for both PPFs and NSC quarterly. The current interest rates for PPF and NSC are 7.1% and 6.8%, respectively
Is the interest compounded in NSC?
The post office interest rate on NSC gets compounded annually. Hence, you receive the returns only after the tenure expires, i.e., after five years.
How do I get an NSC certificate?
You have to submit a duly-filled application form at the nearest post office or authorised bank branch with self-attested copies of KYC documents. After this, make the payment through cash or cheque. Once the documents are processed and the payment is received, your certificate will be issued.