How to invest in a National Savings Certificate? Here's a step-by-step guide (2024)

Amidst a multitude of investment options, each with its unique advantages, National Savings Certificate (NSC) issued by the Indian government is a conventional yet widely embraced investment choice. For those unfamiliar or new to the investment landscape, the NSC is a fixed-income investment program that provides a secure and reliable option with assured returns. It has gained popularity among modest and mid-sized investors due to its tax benefits and attractive return rates.

The NSCs undergo periodic interest rate adjustments determined by the Finance Ministry. For the fourth quarter of the fiscal year 2023-24 (January-March), the prevailing NSC interest rate stands at 7.7% per annum. This rate remains consistent with the preceding quarter (October-December 2023). It’s important to note that the interest is compounded annually.

How to invest in an NSC?

Engaging in NSC investments is a simple process, offering two primary avenues: offline (physical certificate) and online (e-mode). Let’s delve into the details of each:

Individuals who prefer not to utilise the internet for their investments can opt for the offline mode to purchase the NSC.

• Go to the nearest post office: NSCs are available for purchase at any post office branch across India.
• Complete the NSC application form: Obtain the form either from the post office or online. Fill in your details, the preferred deposit amount, the chosen maturity period (currently limited to 5 years), and nominee information, if applicable.
• Provide KYC documents: Submit self-attested copies along with the original documents of your identity proof (such as Aadhaar card, PAN card, etc.) and address proof (like Aadhaar card, voter ID, etc.).
• Complete the payment: You have the option to pay in cash or by cheque. The minimum investment required is Rs. 100, and there is no maximum limit.
• Receive your NSC certificate: The post office will generate and issue the physical certificate to you. Ensure to store it securely as it serves as evidence of your investment.

The online mode provides an alternative for investing in NSCs, allowing you to conveniently invest in these instruments through the internet. This eliminates the need to find the nearest post office at your convenience.

• Utilise your DOP internet banking: If you hold a savings account with a post office and have internet banking access, you can make online investments in NSCs.
• Access DOP Net Banking: Navigate to “General Services" and click on “Service Requests".
• Click on New Requests: Opt for “New Requests" and then select “NSC Account – Open an NSC Account (For NSC)".
• Decide your investment amount: Input the deposit amount and select the debit account associated with your PO savings account.
• Password: Agree to the terms and conditions and provide your transaction password.
• Download the deposit receipt: This serves as confirmation for your online investment.

Key features of NSC investments

Below are the essential attributes of NSCs:

• Government-backed assurance: Supported by the Government of India, NSCs provide a significant level of assurance and security for your investment, ensuring the protection of your principal amount.
• Assured returns: NSCs offer a fixed interest rate determined and guaranteed by the government for the entire investment duration. Presently, the interest rate for NSCs in Q4 FY 2023-24 stands at 7.7% p.a., compounded annually.
• Tax advantages: NSC investments are eligible for tax deductions under Section 80C of the Income Tax Act, allowing deductions of up to Rs. 1.5 lakh per year. This enables a reduction in your taxable income and potential tax savings.
• Minimal investment requirement: NSCs have a low entry point with a starting investment amount of just Rs. 100, ensuring accessibility for investors across different income brackets.
• Unrestricted upper limit: NSCs do not impose a maximum limit on the investment amount, offering flexibility for larger investors seeking a secure and tax-efficient investment avenue.
• Fixed 5-year maturity: NSCs currently come with a predetermined maturity period of 5 years, implying that the invested amount cannot be withdrawn before the completion of this term.
• Restricted liquidity: Although early withdrawal is technically feasible, it results in penalties and diminishes the interest earned. This characteristic encourages the development of long-term saving habits.
• Compound interest: NSCs accrue interest on an annual compounding basis, implying that the interest earned on the investment accumulates over time, enhancing the final payout.
• Nomination option: You have the flexibility to nominate an individual to receive the maturity amount in the event of your demise, ensuring that your investment benefits your chosen beneficiary.
• Simple investment process: NSCs offer ease of investment, allowing you to invest effortlessly at any post office branch in India. The procedure is uncomplicated and involves minimal documentation.

In summary, NSCs provide a secure and low-risk investment avenue with assured returns and appealing tax advantages. This makes them especially suitable for investors who prioritise stability, are risk-averse, and aim for long-term financial security and tax efficiency.

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Published: 20 Jan 2024, 01:43 PM IST