National Savings Certificate (NSC): Features, eligibility and tax benefits—5 key things to know

National Savings Certificates (NSC) are issued under a government-backed savings scheme that offers low-risk investment, fixed returns and even tax benefits under certain conditions. Designed for conservative investors, the scheme provides guaranteed returns and easy accessibility. The current interest rate on NSC deposits is 7.7 per cent compounded annually, according to the India Post website.

Five key features of NSC

Here are five key features of the NSC scheme, as per the information available on the India Post portal:

1) Eligibility

NSC is available to:

• Resident citizens of India
• Individuals holding a single account
• Up to three adults holding a joint account
• Joint A accounts, held jointly by all depositors
• Joint B accounts, payable to any of the depositors
• A guardian on behalf of a minor
• A guardian on behalf of a person of unsound mind
• A minor who has attained the age of 10 years
• An individual may open any number of accounts

2) Deposit

• The minimum deposit amount is Rs 1,000, and thereafter in multiples of Rs 100
• There is no maximum investment limit

3) Tax deduction benefits

One of the key features of this scheme is that investments in NSC qualify for tax deduction under Section 80C of the Income Tax Act in the old regime. The maximum deduction available is Rs 1.5 lakh in a financial year.

Interest earned during the first four years is deemed to be reinvested and also qualifies for deduction under Section 80C. However, the interest earned in the fifth year does not qualify for this benefit.

Also, no such deduction is available for people choosing the new tax regime.

4) Maturity details

• The deposit matures after five years from the date of investment
• Interest accrues at the end of each year
• Interest accrued up to the end of the fourth year is deemed to be reinvested and added to the certificate's value

5) Premature closure

The account cannot normally be closed before maturity. However, premature closure is allowed in the following cases:

• On the death of the sole account holder or all account holders in a joint account
• On forfeiture by a pledgee who is a gazetted officer, provided the pledge complies with scheme rules
• On the order of a competent court

If an account is closed within one year, only the principal amount will be payable.

Now, let's see some examples:

NSC Investment Example: Rs 10,000 investment grows to Rs 14,490 by maturity

A sum of Rs 10,000 invested in the certificates for the full maturity period of five years yields interest of Rs 4,490, translating to a maturity amount of Rs 14,490 (principal plus interest), calculations show.

Similarly, a one-time investment of Rs 50,000 is estimated to grow to Rs 72,452 (with Rs 22,452 interest) when held for the five-year period grows.

A sum of Rs 1 lakh yields a return of an estimated Rs 44,903 upon maturity in NSC, taking the maturity amount to Rs 1,44,903.

(Disclaimer: These are projections and not investment advice. Do your own due diligence of consult an expert for financial planning.)