National Saving Scheme: Smart Investment Strategies

The National Savings Certificate (NSC) is a government-backed savings scheme in India that offers fixed interest rates and a safe investment option. It has a tenure of 5 to 10 years and qualifies for tax deductions under Section 80C. With a low minimum investment, it's ideal for conservative investors seeking secure savings.

The National Savings Certificate is a fixed-income investment scheme that you can open with any post office branch. This is an initiative by the Government of India and encourages subscribers – mainly small to mid-income investors – to invest while saving and also saving on income tax. NSCs involve short-term investments that earn interest at fixed rates. The interest compounds annually but is paid at the end of the certificate's maturity.

The minimum amount required to open an NSC account is Rs.1,000. If you want to deposit a higher amount, you can do so in multiples of Rs.100. There is no maximum limit for the amount you deposit.

To invest in the National Savings Certificate scheme, you must be a resident Indian citizen. NRIs are not eligible to invest in NSC. There is no minimum or maximum age for an individual to invest in NSC. You can even invest in this scheme on behalf of a minor.

Previously, banks or post offices issued physical NSC certificates. This has been discontinued since 2016. At the moment, certificates can be bought either by electronic mode (e-mode) or Passbook mode.

Eligibility criteria

To be eligible to invest in the National Savings Certificate (NSC) scheme, you must be an Indian citizen and resident. Non-resident Indians (NRIs) are not eligible to invest in NSC. There is no age limit for individuals to purchase a certificate, and you can invest on behalf of a minor. However, the minor must be over the age of 10 years old.

Public and private limited companies, trusts, and Hindu Undivided Families (HUFs) are not eligible to invest in this scheme. Only individuals can invest, and each person can hold up to three joint accounts.

To open an NSC account, you will need to provide proof of identity and address, such as an Aadhaar card, PAN card, passport, driver's license, or utility bill.

Documents required

To apply for the National Savings Certificate (NSC), you will need to submit the following documents:

• A completed NSC application form
• Identity proof, such as a passport, Permanent Account Number (PAN) card, driver's license, senior citizen ID, Aadhaar card, or any other official government identification
• Address proof, such as an electricity bill, passport, phone bill, bank statement, Voter ID, bank passbook, Ration Card with a photograph, or a Certificate or ID card issued by the Post Office
• A photograph
• Cash or cheque deposit of the amount to be invested

These documents can be submitted at any India Post Office to obtain an NSC in applicable denominations.

Online application process

To apply for the National Savings Certificate (NSC) online, follow these steps:

Step 1: Open the Department of Posts (DOP) net banking and log in.

Step 2: Under the "General Services" section, click on "Service Requests" and then select "New Requests".

Step 3: Choose "NSC Account – Open an NSC Account (For NSC)".

Step 4: Enter the deposit amount and choose the debit account linked to your Post Office (PO) savings account. The minimum deposit amount for NSC is Rs. 1,000, and there is no maximum limit.

Step 5: Click on "Click Here" to read the terms and conditions. After accepting them, submit the application online.

Step 6: Enter the transaction password and click on "Submit".

Step 7: View and download the deposit receipt.

Step 8: Log in and click on "Accounts" to view the details of your NSC account.

To complete the online application process, you will need to submit the following documents:

• NSC application form
• Identity proof (e.g., PAN card, passport, senior citizen ID, driver's license, Aadhaar card)
• Address proof (e.g., bank statements, phone bills, passport, electricity bills)

Please note that while there is no maximum limit on the purchase of NSCs, only investments of up to Rs. 1.5 lakh per year can avail of tax benefits under Section 80C of the Income Tax Act, 1961.

Offline application process

The National Savings Certificate (NSC) is a fixed-income investment scheme that can be opened with any post office branch. Here is a step-by-step guide on how to invest in NSC offline:

Step 1: Collect the NSC application form online or at any post office.

Step 2: Fill out the form with all the details, including the deposit amount, chosen maturity period, and nominee information.

Step 3: Submit the form with self-attested copies of the required KYC documents, such as identity proof (Aadhaar card, PAN card, etc.) and address proof (Aadhaar card, voter ID, etc.). Carry the original documents for verification.

Step 4: Make the payment of the amount you want to invest. The minimum investment required is Rs. 100, and there is no maximum limit. You can pay in cash or by cheque.

Step 5: Upon approval, collect the physical NSC certificate from the post office and store it securely.

Tax benefits

The National Savings Certificate (NSC) is a secure investment option provided by the Government of India through post offices. It offers reliable returns and significant tax benefits under Section 80C of the Income Tax Act, making it a popular choice among risk-averse investors.

Under Section 80C of the Income Tax Act, investments in NSC provide tax savings of up to Rs. 1.5 lakh. Furthermore, the annual interest earned on NSC assets is treated as a fresh investment for tax purposes. While there is no upper limit on the amount that can be invested in NSC, only investments of up to Rs.1.5 lakh per year can earn a subscriber a tax deduction.

Additionally, the interest earned on the certificates is also added back to the initial investment and qualifies for a tax break, subject to the overall annual limit of Rs.1.5 lakh. The interest earned in the fifth year, however, is not reinvested and is thus taxed at the investor's applicable slab rate.

The National Pension Scheme (NPS) offers tax benefits for both employees and employers. Here are the details:

• Employee contributions: By investing in NPS, you can save up to 10% of your salary (basic + DA) on taxes under Section 80CCD(1), subject to a maximum of Rs.1.5 lakh under Section 80CCE.
• Self-employed individuals: Under Section 80CCD (1), self-employed individuals can claim a tax deduction of up to 20% of their gross income, subject to the Rs.1.5 lakh ceiling under Section 80CCE.
• Tax benefit for businesses: Under Section 36 (1) (iv) (a), companies can deduct contributions made to their employees' NPS accounts (up to 14% of the basic salary) as a business expense.

Frequently asked questions