National Savings Certificate (NSC) Tax Benefits

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National Savings Certificate which is also known as NSC is a savings Bond which is designed for salaried employees and businessmen for small savings and income tax savings investment in India.

National Savings Certificate can be purchased from any Post Office in India by an adult either in his / her name or on behalf of a minor, a trust or two adults jointly. Government provides two different issues of NSCs which includes NSC – VIII Issues and NSC IX Issues. Under NSC VIII Issue, an eligible person can invest for 5 years and under NSC IX Issue, an eligible person can invest for 10 years.

Government of India have fixed the NSC interest rate which is subject to revision on yearly basis which is at the start of every financial year i.e. 1st April. The current NSC rates are for NSC VIII Issue which matures after 5 years is 8.50% compounded half yearly and NSC IX which matures after 10 years is 8.80% compounded half yearly.

This provides dual benefits to the subscribers as one can reinvest the earned interest and claim this amount as deductions under Section 80C. In case you do not reinvest this amount in NSC after maturity, the deposit will be start earning taxable interest at simple interest rates, reducing the scope for accruing interest.

Interest on premature withdrawal of NSCs

National Savings Certificate can be withdrawn prematurely only on some special cases which are

  • In case of death of the certificate holder or the holders
  • Forfeiture of a pledge being a Gazetted government officer when pledge conforms to the rules
  • On court order.

National Savings Certificate Tax Benefits

National Savings Certificate offers various tax benefits. In this section we will discuss the tax benefits available under National Savings Certificate.

  • As under NSC, the certificate holders will not get paid directly in their accounts and it can be reinvested, a taxpayer/investor can claim for tax deduction on the interest amount. For that they need to show the interest as income and then claim income tax rebate on it under Section 80C of the Indian Income Tax Act.
  • Under National Savings Certificate (NSC), a yearly investment up to Rs. 1,00,000 qualifies for income tax repayment
  • Under National Savings Certificate, there is no tax deduction at source.

How to calculate National Savings Certificate Tax

To calculate National Savings Certificate tax you are required to enter your date of purchase of NSC, total NSC amount, total years of completion after purchase and the applicable rate of interest, and the calculator will reveal the total interest. And based on the results you can claim your income tax rebate.

Key Benefits of investing in NSCs

NSC is one of the safest schemes as it is backed by the government of India (GoI). It also comes with a lot of benefits which are as follows:

  • Under NSC one can receive interest up to 8.8% which is indeed an attractive rate of interest on savings.
  • If you invest in NSC, after 5 to 10 years once the scheme matures, you will receive assured returns on it
  • NSC is one of the most reasonable investment as one can invest as minimum as Rs. 100.
  • NSC makes getting loans easier as by showing your NSC certificate you can get easy loans from the bank.
  • National Savings Certificates are issued in different denominations such as Rs. 100, Rs.500, Rs.1000, Rs. 5000 and Rs.10, 000. A person is free to purchase any number of National Savings Certificates as per his/her convenience
  • This scheme is considered to be very flexible as the investors can transform their National Savings Certificate from one individual to the other, if they certificate holder intends to transfer their certificate.

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