• Notification Date: 08-10-2024
• Notification No: N/A

NSC (National Savings Certificate): Interest Rates & Tax Savings Benefits in 2024

The National Savings Certificate (NSC) is a safe investment option offered by the Government of India through post offices. It is popular among risk-averse investors as it offers reliable returns and significant tax benefits under Section 80C of the Income Tax Act.  

What is a National Savings Certificate?   

The National Savings Certificate is a fixed-income investment scheme that can be opened at any post office branch. It is an initiative of the Government of India to encourage its subscribers (mostly small and medium-income investors) to save and invest while reducing their income tax. You can invest in NSC on behalf of a minor or with another adult as a joint account at your nearest post office. The term of NSC is 5 years. There is no upper limit on the purchase of NPC. 

Who should invest in NSC?   

Anyone looking for a safe investment opportunity to earn stable interest while saving on taxes can choose to invest in NSC. NSC offers a guaranteed interest rate and full capital protection. However, like most fixed-income investments, it cannot provide inflation-beating returns like tax-saving mutual funds or national pension schemes.   

The government is promoting National Savings Certificates as a savings scheme for individuals. Hence, Hindu independent families (HUFs) and trusts cannot invest in it. Moreover, even non-resident Indians (NRIs) cannot purchase NSC certificates. The program is only for individuals residing in India. To invest in an NSC, one must fulfill the following NSC eligibility requirements:
1. Hindu Undivided Families (HUFs), Trusts, and Private and Public Limited Companies (PLCs) are not permitted to invest in NSCs.
2. The person must be an Indian citizen. Non-resident Indians cannot invest in NSCs.
3. People aged 10 years or older.    

What is the current NSC interest rate for October-December 2024?   

The government sets the NSC interest rate, which is updated every three months (i.e., quarterly). The NSC interest rate for the quarter completion December 31, 2024, is 7.7% (compounded yearly). The account will mature after 5 years from the date of deposit.    

NSC Deposit Details   

The lowest investment in NSC is Rs 1000, and there is no higher limit. As part of the scheme, any number of accounts can be opened. The deposit will mature after 5 years from the date of deposit.   

NSC features and benefits   

1. Fixed income: Currently, the scheme guarantees investors a 7.7% return. The returns offered by NSCs are generally higher than FDs.
2. Types: Initially, the scheme had two types of certificates: NSC VIII issue and NSC IX issue. The government stopped issuing NSC IX in December 2015. Therefore, only NSC VIII issues are available for subscription now.
3. Tax Savings: Under the government-sponsored tax saving scheme, you can claim up to Rs 1.5 lakh as per the provisions of Section 80C of the Income Tax Act, 1961.
4. Start Small: You can invest with an initial investment of Rs 1,000 (or multiples of Rs 100) and increase the amount if possible.
5. Interest Rate: Currently, the interest rate for Q2 2024-25 is 7.7% per annum, adjusted quarterly by the government. Interest is compounded yearly but paid at maturity.
6. Term: The term is 5 years.
7. Access: The program can be purchased at any post office by submitting the required documents and going through the KYC verification process. Moreover, it is easy to transfer the certificate from one post office to another.
8. Loan Collateral: Banks and NBFCs accept NSC as collateral or guarantee for secured loans. To do this, the postmaster-in-charge has to stamp the certificate with a transfer stamp and forward it to the bank.
9. Compounding Effect: The interest received on investment is by default reinvested at compound interest, but the returns do not exceed inflation.
   

Tax Benefits on NSC Investment   

There is no upper limit on the amount of investment in an NSC, but only investments up to ? 1.5 lakh per annum qualify for tax deduction by the subscriber under the Income Tax Act, 1961, Section 80C. Further, the interest earned on the securities is added to the original investment amount and also qualifies for tax deduction. Further, for the first four years, the interest earned on NSC is considered to be reinvested (i.e., put back into the original investment) and is eligible for tax deduction subject to the annual aggregate limit of Rs. 1.5 lakh. However, the interest earned in the fifth year is not reinvested and is therefore subject to the progressive tax rates applicable to the investor.