The National Savings Certificate (NSC) is an investment scheme floated by the Government of India. It is a savings bond that allows investors to save income tax. There is no maximum limit on the purchase of NSCs, but investments of up to Rs 1.5 lakh in the scheme can earn a tax break under Section 80C of the Income Tax Act. The certificates earn a fixed interest, which is currently at the rate of 8.1% per annum. This interest is added back to the investment and compounded annually. These certificates can also be used as collaterals while taking loans from banks
These certificates can be taken by an individual and held as individual investments or taken and held as a joint investment.
While there is a limit on who can invest in an NSC, there is no limit on the amount that a person can invest in an NSC.
Since these products are meant for individuals, groups of people like companies, trusts cannot invest in them.
There is a possibility where an individual can take NSC on behalf of a minor.
The minimum amount that a person can invest in an NSC is Rs. 100.
There are also specific denominations in which these certificates can be taken and these are Rs. 100, Rs. 1,000, Rs. 5,000 and Rs. 10,000 under NSC Issue IX.
Investments cannot be withdrawn prematurely unless the case involves the death of the primary holders.
Nomination facilities are also provided under both Issue VIII and Issue IX.
The certificates can only be encashed at the post office where they were issued however, if the holder can provide sufficient evidence that he is entitle to the proceeds then they can be encashed as any post office
The interest can be virtually tax free except for the interest that is earned in the last year.
There is no upper limit on the amount that can be invested in these certificates.
If the certificates are lost or damaged, duplicates can be arranged for.
Investments made in an NSC come under 80C of the IT ACT and afford the investor tax benefits.
The interest earned is compounded and reinvested in the scheme by default which means that without purchasing extra certificates, you can increase the INVESTED amount.
When certificates mature, they can be reinvested in the scheme again by purchasing certificates of a value equal to the maturity value of the old ones.
The certificates can also be taken on behalf of a minor.
The investment can be used to secure loans.