National Savings Certificate

  • Tejesh Kumar
  • Jan 07 2019
  • 6 minutes
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Investments for Wealth Generation

What is a National Savings Certificate?

The National Savings Certificate (NSC) is a small-savings scheme backed by the Government of India. This instrument is popular for its ability to link tax benefits with assured returns.

This initiative provides a channel to build a corpus for retirement. The current interest rate is 8% and is compounded annually. This facility is provided at any post office with a minimum investment amount of Rs. 100.

Premature withdrawal is not available for this 5 year scheme. However, loans against your NSC savings is permissible. NSC is eligible for tax deductions up t0 Rs. 1.5lakh under Section 80(C) of the Income Tax Act.

Risk averse investors who want to remain invested for 5 years or more, looking for steady returns through lump sum investments.

  • Investors looking to build a corpus over a long period regardless of earning inflation beating returns.
  • Investors who are able to make regular small deposits.
  • Debt Mutual Funds 
  • Company deposits
  • 5 year Fixed Bank Deposits
  • 5 year Post-Office Time Deposit


  • RiskThe scheme is risk-free.
  • ReturnsThe scheme currently offers an interest rate of 8% and the rates are revised every quarter.
  • TaxationThe invested amount receives tax deduction up to Rs.1.5 lakh as per Section 80(C).
  • Lock-in LimitationsHas a lock-in period of 5 years.
  • WithdrawalsWithdrawal is permissible on account of death of the NSC holder, forfeiture by a pledge or a court order.
  • Capital ProtectionIt is a Government scheme so the capital is highly safe and reliable.
  • Inflation ProtectionWhen inflation is above interest, the account earns no real returns.

Investment Goal

It is initiative by the Indian Government for the citizens to provide a regular monthly income flow during their retirement. The scheme receives tax benefits on deposit and yields assured returns..

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EligibilityThe account holder must be an Indian Resident.
Entry AgeNo age barriers.
Fee Structure (Account Opening Fee & Maintenance Charges)You can start an NSC account with just Rs. 100. (available denominations for certificates are Rs.100, Rs. 500, Rs.1000, Rs.5000 and Rs.10,000)
InterestThe current interest rate is 8% (compounded annually).
Tenure5 years.
Exit OptionPremature encashment is permissible on account of death of the NSC holder, forfeiture by a pledge or a court order.
Account Holding Categories

  • Sole /Joint Account

  • Minor through a guardian.

Nomination facilityThis provision is available.

Capital & Inflation Protection

Since this scheme is backed by the Indian Government, the capital is highly protected.

There is no inflation protection because the account earns no real returns when the inflation rate is more than the rate offered by the national savings certificate.


The interest rate currently is 8% (compounded annually) and is guaranteed. The government revises the rates quarterly according to the government- bond rates. Once the investor has made his deposit, the interest won’t change during the tenure.


Premature encashment of NSC is not allowed before maturity. However withdrawal is permissible under the following conditions:

  • Death of the account holder.
  • Forfeiture by a pledge
  • Through a court order

Also loans can be borrowed against the NSC savings.

Tax Implications

  • Under Section 80(C) of the Income Tax Act, the investment amount receives deductions up to Rs. 1.5 lakh per annum.
  • The interest earned from NSC is eligible for tax deduction under Section 80(C) provides it is reinvested .
  • However, the income on maturity is taxable if the interest accrued is not added with Rs.15 lakh deduction

Account Setup Information

How to open?

The account can be opened at any head or general post office and requires the following documents:

  • NSC application form (receivable at the post office).
  • Carry originals of ID proof during account opening for verification purpose.
  • Choose a nominee

You can buy the NSC via cash, cheque or a demand draft in favor of the postmaster from the respective post office you have decided to avail NSC. By providing an indemnity bond you an receive duplicate certificates of NSC in case of any damage or loss.

Online Access

Online facility is not yet available, nevertheless you can use the option of ebanking after opening the account

Key Takeaways

  • If you have obtained transfer rights, you can enash certificates at any post office.
  • Certificates are transferable across post offices.
  • For both purchase and payment, you can provide the power of attorney to another person.
  • The account receives tax deductions under Section 80(C) up to Rs.1.5 lakh.

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