What is National Savings Certificate?

National Savings Certificate (NSC) 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 qualifies 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

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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 the 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 the 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.

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.

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)

Source- Indian Post

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Tags : Income Tax Deductions (418) nsc (28) Section 80C (134)

53 responses to “All about NSC and Tax Benefit”

  1. vijay mohan rao says:

    please give me clarification,i am a tax assesee, can i purchase NSC on my wive name and produce for under Sec 80 C.

  2. S.Krishnamoorthy says:

    Whether accrued interest taxable?

  3. Sunny says:

    If some one has already invested the complete 1.5lac U/S 80c for NSC, then in that case can we declare NSC interest U/S 80C and get benefit of the same.
    Or it will be taxable as the limit of 1.5 lac U/S 80c is fully utilised ?

    • K.Srinivasa Murthy says:

      I too got the same doubt . I purchased NSC s for Rs 1.50 lakhs.and deducted the amount from my total income under 80 c . The interest earned is not taxable (except for the last year ) as it is treated as reinvested .But we have to show it as income and claim deduction .Is it allowed as the maximum limit
      of Rs 1.50 lakhs under 80c is already utilised in the same year?

  4. Pritam says:

    If i would buy nsc for sum of 150000 /- for once , can i claim tax deduction of upti 150000/- every year

  5. PAWAN KUMAR says:

    I invested in NSC in 2015, of 5 year duration. will i get the benefit under section 80C till maturity also want to know that after maturity i can show the total amount (earned Interest) in head income from other sources instead of every year.

    pls reply asap.

  6. uma says:

    hi, can u explain this text in detail ( with example, if possible) “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.”

    • sreenivasulu says:

      suppose first year you invested some 1,00,000/-
      Assume interest rate is 9.5%
      then at the end of first year total is 1,09,500/-
      so, 2nd year your investment is 1,09,500/-
      likewise..

  7. Vijay Sharma says:

    NSC purchase in wife name can give tax benefit, as per our payroll team saying only given benifit of tax if NSC name of Taxpayer

  8. mlarora_53@yahoo.co.in says:

    Thanks for the information. It shall be better if you could give us the table for interest to be taken for exemption and investment under sec. 80C.

  9. Rajeev Ranjan says:

    NSC purchase in wife name can give tax benefit.

  10. swapna says:

    nsc is wife’s or childrens name then husband or father get tax benifit

  11. Mukesh Kumar Sen says:

    Can I will get 10 (10d ) benifits in my investment Rs200000 in NSC

  12. Sandhya Ramachandran says:

    wat abt 5 yR NSC ISSUE VIII

  13. Atul Sarda says:

    I HAVE PURCHASE NSC IN JOINT NAME ON PART B BASIS I.E EITHER OR SURVIVOR BASIS BUT WHEN I GO TO TAKE PAYMENT FOR THE SAME POST OFFICE ASKING FOR BOT PERSON PROOF ,SIGNATURE WITHOUT WHICH HE IS NOT MAKING PAYMENT

  14. Vikas says:

    Suppose i earned 8000 interest on NSC in this year and shown it as income from other sources. Upto 10 thousand interest income is free then this 8000 can be taken as free income?

  15. jigisha says:

    if I open National saving certificate for my daughter
    is it possible to get tax free.she is 14 years old.

  16. Gaurav Bhardwaj says:

    Hi,
    My name is Gaurav Bhardwaj and I am from Delhi.

    I bought 8 NSC certificates for a total of Rs 40000 in January 2010. These were 8th issue of the NSCs as per the certificates that I have got. Additionally it states that the total amount of 10,075 will be paid per certificate after maturity i.e. after 6 years.
    Today when I went to the Post Office that I am eligible to get only Rs 64 thousand something where as, as per the certificate, ideally I should be getting Rs 80,600.

    Can you please advise how that can be possible without intimating it to the investor.

    Looking forward to your reply.

    With regards
    Gaurav Bhardwaj

  17. anu says:

    Hi,

    I had got 2 NSC’s of 10K value in 2012 FEB but was not aware that we need to put it against tax returns from next year onwards, Kindly let me know what can be done now?
    Should I put it in tax returns from 2015 ?

  18. lakshay says:

    is there any rule change for post office that post office will not pay your money from nsc or kvp by cheque or cash post office is saying that you should open saving ac in post office after that post office transfer payment in your ac then you withdraw this

  19. Arun says:

    I have been given to understand that NSC IX issue for 10 years is no longer available but I did not find any notification on internet. Is it true?

  20. MUHAMMED RASHEED P A says:

    WHAT WAS THE AMOUNT REQUIRED TO TAKE NSC CERTIFICATE FOR PARTNERSHIP FIRM

  21. Kistu siqueira says:

    i am an NRI working in gulf. You said NRI cannot invest in NSC but can i invest in my wife and children name.

    If yes, how much i can invest per annum to get good returns and also avoid paying tax

  22. 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

  23. Bhupesh Chaudhari says:

    Dear Mr. Deepak Verma,

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

  24. 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?

  25. Revs says:

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

  26. 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?

  27. 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

  28. 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.

  29. 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?

  30. Rawal Singh bhati says:

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

  31. Ilavarasan says:

    if I open National saving certificate for my daughter

    is it possible to get tax free.

  32. 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.

  33. 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?

  34. rasika says:

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

  35. bharat says:

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

  36. 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

  37. Vipin Choudhary says:

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

  38. abhishek says:

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

  39. Chandrasekar says:

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

  40. 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.

  41. Saritha says:

    Please explain the tax implications when the NSC matures.

  42. pal says:

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

  43. sanjeev says:

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

  44. Ashok Bidnur says:

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

  45. 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

  46. Duke Sekhon says:

    Thanks for the useful information for the lay taxpayer.

  47. NIRAJ says:

    KYC DOCUMENTS ARE REQUIRED FOR PURCHASE

  48. NIRAJ says:

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

  49. Shubham says:

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

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