People in India lack financial literacy and suffer after their 30’s or surely at retirement. For avoiding such a future, it is wise to develop a habit of investing in the 20s as you can freely take risks at this age. While some schemes present in the market fetch you high profits, but there is a bit of more risk involved. This is because the higher the reward higher would be the risk involved. But, there are also some schemes which also reap good returns and involve a much lower risk. Furthermore, some of these schemes are backed up by the government, which ensures the reliability and security of your hard-earned money.
Post Office National Savings Certificate (NSC) Explained
What is Post Office NSC?
Post Office NSC or National Savings Certificate is one of such schemes that are backed up by the Government of India. It is very popular amongst folks due to its simplicity and ease. This scheme was introduced in the markets in the early 1950s for fund collection for the development of the nation, and since then, it has been the talk-of-the-town for people who invest. When it started, it was a fund generating investment scheme, which later got transformed into a tax saving scheme. The biggest pro of this scheme is that it is backed up by the Govt. of India and carries a sovereign guarantee. As a part of the postal savings system of the Indian Postal Service, this scheme offers better returns than its other schemes like Sukanya Samriddhi Yojana, NPS, PPF’s, etc.
Benefits of NSC
The biggest benefit is that people who invest in NSC are entitled to a claim of deduction of 1.5 Lakhs from their taxable income under Section 80C of the Income Tax Act. So through investing, people can also save their taxes and spend it as per their wishes. Furthermore, this scheme ensures that people will be able to get their principal and interest back when they are due. This scheme offers guaranteed results and can be a very good source of regular income. Investing a handsome amount fetches you a passive income source, stabilizing your financial status. Banks and NBFC’s readily accept NSC as collateral or security, and thus investing in this scheme fetches your very strong support for procuring a loan. All you need to do is to get it to transfer is just to get it stamped by your postmaster and get it transferred to the bank. There is no TDS levied on the NSC payouts, although applicable taxes would be charged. After the maturity period, you are liable to receive the entire maturity value. Also Read: Top 6 LIC Policies To Invest in 2020 The provision of the nomination of the scheme makes it so much popular. The investor has the provision of nominating even a minor of his/her family or any other member so that they can inherit it in case of any unfortunate event.
The drawback of NSC
You are not allowed to exit the scheme prematurely. This would only be accepted in case of the death of the investor or on the issue of a court order.
What are the rates of Interest of NSC?
The rate of interest is fixed by Govt. of India each year by the 1st of April. One major benefit of the scheme is also that the rate of interest is fixed until the maturity date, irrespective of the condition of inflation. This interest rate is fixed at the time of the issue of the NSC. Usually, Govt. of India tends to fix the rate of interest slightly higher than the inflation, to combat the depreciation of the invested amount. If this doesn’t happen, then the invested amount will gradually decrease and eventually come to zero at some point in the future. The rate of return is also unaffected by the market fluctuations as the rates become fixed for the lock-in period making it one of the safest and securest investments. For the quarter ranging from Jul ’18 to Sept’18, the five-year scheme fetched an interest rate of 7.6%, which grew to 8% p.a. for Oct’18 to Dec’18 and continued for Jan’19 and March’19. Before investment, it is essential to confirm the rates of interest with the Post Office as they are subject to change.
Who are eligible to invest?
All Indian residents are eligible for investing in NSC through any post office in the country. Companies or Trusts or Hindu Undivided Families (HUF) are not eligible to invest in this scheme. The main catch here is that you must be an individual Indian resident at the time of investing.
Who is more likely to get benefitted?
This scheme is ideal for any Indian who is looking out for saving tax while getting a steady income. NSC offers capital protection along with guaranteed interest. Furthermore, it is a very good way of tackling inflation (assumed to be 6% p.a.) as the return of interest of this scheme is greater than that. Investors who dislike high-risk investments or those who aspire to their portfolio by means of fixed return ways prefer to choose NSC.
How to get started in investing in NSC?
To get started, you can fetch an NSC application from your nearest post office, or you can download it online. After filling properly, you can submit it to the post office with attested photocopies of your identity and address proof. The amount with which you want to invest can be deposited through cash/demand draft/ bank transfer.
How much amount can one invest?
A person can invest as minimum as INR 100 in this scheme, which makes it so immensely popular among the masses. The denominations for investing are INR 100, 500, 1000, 5000, or 10000. There is no provision of capping the upper limit of investment, although the tax benefit is restricted to 1.5 Lakhs INR only.
What are the types of NSC?
The Indian Post offices issue two kinds of NSC, which differ in only one scale – tenure:
NSC Issue VIII: In this type, the lock-in period is of 5 years. As the investment is compounded annually, it offers comparatively lesser returns than the other one. NSC Issue IX: In this type, the lock-in period is 10 years, and thus after compounding of the investment amount, people get more returns.
*Discontinuation of NSC IX issue from 20/12/2015
Types of NSC account holding
People have the privilege of operating or holding the scheme individually or jointly. People can opt for the available options, which are:
Single Holder Type Certificate: If the person opts to operate the scheme individually, then this is the type he should opt for. Joint ‘A’ Type Certificate: This type of holding is suitable for people who wish to apply in this scheme jointly. The certificate is issued to both the holders, and at the time of maturity, the amount is payable to both. In case of transfer or cancellation of the certificate, the signature of both the holders will be mandatory. Joint ‘B’ Type Certificate: This is almost the same as the Joint ‘A’ Type certificate, but in this type of account holding, the maturity amount is paid only to one of the holders. This type of holding is ideal in a family where children will be the maturity amount receiver.
What would happen in case of premature withdrawal?
If the scheme holder withdraws the amount from the scheme prematurely in that case:
Case A: If the tenure of investment hasn’t even completed one year, i.e., the person initiates the withdrawal procedure before completion of one year starting from the date of enrollment, then he/she/they are entitled to the invested amount only. The interest amount would not be paid to the holder. Case B: If the tenure of the investment lies between one to three years starting from the date of enrollment, then the holder is entitled to the entire investment amount along with the simple interest earned on the investment amount.
Can NSC be transferred?
NSC transfer is basically of two types: Transfer to another Post Office: In case the holder wishes to relocate his/her NSC to another post office location, he/she/they need to submit a transfer application at either old or new Post Office requesting the transfer of the certificate. Transfer to another Person: If the holder aspires for transferring his/her/their NSC to others’ name, then it can be done through providing written consent to the postmaster of the respective Post Office where certificates are held. But such transfers can be made in only the possible scenarios:
In case of the demise of the holder of the scheme, then the transfer can be made to the nominee. In a case where a court order has been passed. In case of Joint holding of the scheme (Type A and B both), to another joint holder.
Can duplicate NSC be issued?
Yes, duplicate NSC can be issued in case the original one is lost/misplaced/damaged. The Post Office holds the right to issue a duplicate certificate copy after proper verification and validation of all the documentary proofs of the holder along with the application submitted. The Post Office National Savings Certificate scheme provides the safest and better returns, making optimum utilization of money even when they are in the denomination of hundreds.
