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All About National Savings Certificate

Updated On Jan 25, 2022

The National Savings Certificate (NSC) is a fixed income investment scheme that you can open with any post office branch. The scheme is a Government of India initiative. It is a savings bond that encourages subscribers – mainly small to mid-income investors – to invest while saving on income tax.

A fixed-income instrument like Public Provident Fund and Post Office FDs, this scheme too is a low-risk fixed-income product. You can buy it from the nearest post office in your name, for a minor or with another adult as a joint account. NSC comes with a fixed maturity period of five years. There is no maximum limit on the purchase of NSCs, but only investments of up to Rs.1.5 lakh can earn you a tax break under Section 80C of the Income Tax Act. The certificates earn a fixed interest, which is currently at a rate of 6.8% per annum. The interest rate is revised on a regular basis by the government. 

All About National Savings Certificate

Who Should Invest in NSC?

Anyone looking for a safe investment avenue to earn a steady interest while saving on taxes can choose to invest in NSC. NSC offers guaranteed interest and complete capital protection. However, like most fixed income schemes, they cannot deliver inflation-beating returns like tax-saving mutual funds and the National Pension System. The government has made NSC easily accessible for prospective investors by making it available in post office branches spread across the country. 

The government has promoted the National Savings Certificate as a savings scheme for individuals. Hence, Hindu Undivided Families (HUFs) and trusts cannot invest in it. Furthermore, even non-resident Indians (NRI) cannot purchase NSC certificates. The scheme is open only for individual Indian resident citizens.

Features & Benefits of NSC

1. Fixed income:

Currently, the scheme is generating a guaranteed return at the rate of 6.8% for investors. The returns offered by NSC have generally been higher than FDs.

2. Types:

The scheme originally had two types of certificates – NSC VIII Issue and NSC IX Issue. The government discontinued the NSC IX Issue in December 2015. So, only the NSC VIII Issue is open for subscription currently.

3. Tax saver:

As a government-backed tax-saving scheme, you can claim up to Rs 1.5 lakh under the provisions of Section 80C of the Income Tax Act, 1961. 

4. Start small:

You can invest as low as Rs 1,000 (or multiples of Rs 100) as an initial investment, and increase the amount when feasible.

5. Interest rate:

Currently, the rate of interest is 6.8% p.a., which the government revises every quarter. It gets compounded annually but will be payable at maturity.

6. Maturity period:

The maturity period is five years.

7. Access:

You can purchase this scheme from any post office by submitting the necessary documents and undergoing the KYC verification process. Also, it is easy to transfer the certificate from one post office branch to another.

8. Loan collateral:

Banks and NBFCs accept NSC as collateral or security for secured loans. To do this, the concerned postmaster should put a transfer stamp on the certificate and transfer it to the bank.

9. Power of compounding:

The interest you earn on your investment gets compounded and reinvested by default, though the returns do not beat inflation.

10. Nomination:

The investor can nominate a family member (even a minor) so that they can inherit it in the unfortunate event of the investor’s demise.

11. Corpus after maturity:

Upon maturity, you will receive the entire maturity value. Since there is no TDS on NSC payouts, the subscriber should pay the applicable tax on it.

12. Premature withdrawal:

Generally, one cannot exit the scheme early. However, they accept it in exceptional cases like the death of an investor or if there is a court order for it.

Tax Benefits Of NSC Investment

Investments of up to Rs 1.5 lakh in the National Savings Certificate can earn the subscriber a tax rebate under Section 80C. Furthermore, the interest earned on the certificates is also added back to the initial investment and qualify for a tax break as well. 

For instance, if you purchase certificates worth Rs 1,000, you are eligible for a tax rebate on that initial investment amount in the first year. But in the second year, you can claim a tax deduction on the NSC investment(s) that year as well as the interest earned in the first year. This is because the interest is added to the original investment and compounded annually.


As of today, you cannot subscribe to NSC online. You will be required to visit the nearest Post Office to fill out the NSC application form and submit it to the executive in order to open an NSC account.

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Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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