• Mar
  • 19
  • 2015

All about NSC and Tax Benefit

Article ID 50283 | Posted In Income Tax | , | 28 Comments » Print Friendly and PDF

What is National Savings Certificate?

National Savings Certificate is an Investment alternative developed by Government of India with an intention to induce persons to a saving habit and to develop National Savings. National Savings Certificate is issued through Post Offices; they are the nodal agency which makes it available to the common public.

National Saving Certificates in India is ranked as ‘highly secured’ in the class of Investments. It is an Investment’ which has Tax Advantage while (i) Investing, (ii) during the life and (iii) at the time of maturity of the Investment.

Investment limit

There is no Limit for Investment in NSC.

Tax treatment

Deposits  up to Rs. 1.50 lakh  in NSC qualify for Deduction Section 80C of the Income Tax Act. Accrued interest on NSC also qualify for deduction u/s. 80C.

NSC interest is taxable. However, as it is a cumulative scheme (e.g. interest is not paid to the investor but instead accumulates in the account), each year’s interest  is considered reinvested in the NSC. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. Only the final year’s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount.

What you must ensure while filing tax return

To benefit from this feature of reinvested interest and its deduction, it is important to declare the accrued interest on NSC on a yearly basis in your tax return under the head “Income from Other Sources”. Under deductions, you will claim accrued interest for all the years except the last year  under Sec 80C as reinvested NSC interest. Both cancel each other out, making the interest in effect tax-free.

Non-Resident Cannot Invest

Non-Resident Indians are not eligible to purchase the National Savings Certificates.

Denominations in which certificates shall be issued

The National Savings Certificates (IX Issue) shall be issued in denominations of Rs. 100, Rs. 500, Rs. 1000, Rs. 5000, Rs. 10000.

Can be Purchased Jointly and on behalf of minor

Types of Certificates and Issue thereof,

(1)  The certificates shall be of the following types, namely:—

(a)  Single Holder Type certificates;

(b)  Joint ‘A’ Type Certificates; and

(c)  Joint ‘B’ Type Certificates;

(2)  (a)  A Single Holder Type certificate may be issued to an adult for himself or on behalf of a minor or to a minor;

(b)  A Joint A Type certificate may be issued jointly to two adults payable to both the holders jointly or to the survivor,

(c)  A Joint ‘B’ Type certificate may be issued jointly to two adults payable to either of the holders or to the survivor;

Where to Purchase

National Savings Certificates (NSC) are certificates issued by Department of post, Government of India and are available at most post offices in the country. This Certificate can be transferred from a post office where it is registered to any other post office and it can be pledged as a security.

Main Features of  NSC VIII Issue

  • Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses.
  • No maximum limit for investment.
  • No Tax deduction at source.
  • Certificates can be kept as collateral security to get loan from banks.
  • Investment up to INR 1,50,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act.
  • Trust and HUF cannot invest.
  • Rate of interest 8.50%.

Main Features of  NSC IX Issue

  • No maximum limit for investment. Minimum Investment Rs. 100
  • Available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
  • A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor.
  • Rate of interest 8.80%.

Buy National Savings Certificates (NSCs) every month for Five years – Re-invest on maturity and relax – On retirement it will fetch you monthly pension as the NSC matures.

(Republished with Amendments)


28 responses to “All about NSC and Tax Benefit”

  1. ravi says:

    hi,
    I had purchased NSC of value 15000 on 12OCT2013 and while filling returns this year i want to declare intrest, please help to calulate intrest earned for each year, 2014, 2015, 2016, 2017 and 2018

  2. Bhupesh Chaudhari says:

    Dear Mr. Deepak Verma,

    The solution to your answer is stated in the explanation above. Kindly read it carefully

  3. Sumitava Chowdhury says:

    I want to purchase NSC, but one thing which I want to get it cleared first is if I fail to encash my certificate on maturity date, then will the rate of interest drop to that of a SB account rate of interest on the very next day?

  4. Revs says:

    I have opened NSC account in 2014.Can I use the same account for 2015 also

  5. kamal singh says:

    I have purchasing 10,000 nsc certificate on date 01/04/2011 & getting rs 6010 after maturity date 01/04/2017. I want to know incom tax on intrest rs 6010 will be applicable or not.if applicable how calculate?

  6. Deepak Verma says:

    If the Interest on nsc is not provided yearly and if it is provided only in last year then what will be tax effect

  7. george says:

    saving bank interest up to Rs.10,000/- is exempted. can the interest on nsc after maturity be considered as under this head to claim exemption.

  8. Nishit says:

    Hi,

    I have recently purchased Rs1,00,000 worth of NSC VIII Certificates and I will deduct the same amount under Section 80C for my IT Returns. I wanted to know, can I use these same certificates, for which I have claimed tax deduction, as collateral to get Personal Loan?

  9. Rawal Singh bhati says:

    @Rasika ,
    Just for one time ,in the year you make investment. You can claim deduction

  10. Ilavarasan says:

    if I open National saving certificate for my daughter

    is it possible to get tax free.

  11. Sanjay says:

    Hi Saritha, Please be informed that interest in NSC are taxable it can be claimed as tax free if you will declare it under income from other sources and simultaneously you claim the same amount under section 80-C but on the year of maturity the final interest will be taxable because it will not be reinvested rather paid to you. How ever when Maturity proceeds from NSC certificate is concerned it is tax free.

  12. rishi jaiswal says:

    I am 33 years old doing a job in a privately owned IT company. Will you please advise how can I be eligible to get a pension on my retirement supposing to be in late 50s?

  13. rasika says:

    if i invest 100000/- in march,15, for how many yaears i will get exemption of it?

  14. bharat says:

    can i take benefit u/s 80c if i invest on befalf of my mother or wife

  15. Subhendu Sekhar Hari says:

    Sir,

    I am now 60+, like to continue prolong job for further 6 Years, and say 2020 I like to get back all my NSC Money what ever I will be depositing, how to proceed,guide line requested.

    Regards

    Subhendu Sekhar Hari

  16. Vipin Choudhary says:

    If i purchase NSC on the name of my wife, will it be useful for tax benefit for me???

  17. abhishek says:

    What is the minimum no. Of years for NSC is required to make it eligible for tax exemption.

  18. Chandrasekar says:

    Hi, Thanks for the uswful info.
    Is NSC IX Issue( Investment of 10 years) applicable under 80C?
    Please clarify.

  19. Jeyaram G says:

    Thanks for the useful article.
    Article says interest accured can be considered tax exempted for first 5 years. Is it applicable for 10 year NSC also ? meaning, for the first 5 years of NSC , accrued income need not be considered for tax purpose. If so, in the 6 th year of 10 year NSC, does the total interest accured from 1st to 6th year have to be considered for tax? Request clarificationpl.

  20. Saritha says:

    Please explain the tax implications when the NSC matures.

  21. pal says:

    Please explain how is income from nsc in a way tax free as mentioned above

  22. sanjeev says:

    Is NSC ix issue also eligible for tax rebate under 80 c or any other section???

  23. Ashok Bidnur says:

    Whether second name holder in joint NSC can claim exemption under 80c of income Tax Act.?

  24. Bhakti says:

    Is it compulsary to have 1st name on certificate to get rebate. can other holder get rebate of 80 c ? please guide me

  25. Duke Sekhon says:

    Thanks for the useful information for the lay taxpayer.

  26. NIRAJ says:

    KYC DOCUMENTS ARE REQUIRED FOR PURCHASE

  27. NIRAJ says:

    YES ,THE FIRST HOLDER WILL GET 80C REBATE IN JOINT A OR B –NSC CERTIFICATES

  28. Shubham says:

    Can we use Joint B NSC certificates with First name as Tax payee, for Income tax rebate

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