National Saving Certificate
With regards to the matter of reserve funds, there are considerable measures of alternatives that have been made accessible to investors in India. These choices offer a scope of elements that can incorporate things like attractive interest rate, safety for the money invested, income tax benefits and also the chance to increase the amount invested and that too by a substantial amount. These items are intended to address the issues of different needs of investors, which can be a blend of a portion of the elements specified previously.
One such blend of alluring interest rate, safe investment avenue and tax benefits are the National Savings Certificates or NSC. These are investment instruments that can enable investors to get returns on the money invested and furthermore get benefits in their assessable income. The commencement of the NSC can be followed back to the 1950s when the government provided saving certificate authentications with a specific end goal to raise cash to help support the development of a new and independent India. They are issued by the post office and can be taken from any branch of the Indian postal administration.
How NSC Function
NSC is worth a particular sum which is viewed as your venture. The buying of the certificate will be done to the tune picked by you yet in categories assigned by the government. This implies in the event that you contribute to a particular mentioned NSC.
Once the venture has been made, it earns an interest in view of the rates related with the sort of certificate purchased. The maturity date for these certificates is set to 5 or 10 years from the date of procurement however the interest is figured on a yearly basis. This interest won’t be paid to the certificate holder till the time as the venture matures. The interest that is earned can additionally be reinvested in the NSC itself.
Types of National saving certificates
There are 2 types of certificate made available to the people who want to invest in NSC. They are NSC Issue VIII and NSC Issue IX.
NSC Issue VIII – The aim of this certificate was to provide an investment avenue for those people who were looking for a way to invest in safe instruments and avail tax benefits at the same time. These certificates come with lower rate of interest compared to Issue IX. Anybody can avail this certificate other than trust and HUF and generally these certificates come in denomination between Rs 100 to Rs 10000 for tenure of 5 years.
NSC Issue IX – This certificate also come in denominations ranging from Rs. 100 to Rs. 10,000 and comes with an interest that is slightly higher than that which is offered for Issue VIII. These certificates come with a maturity period that can be as long as 10 years. As is the case with Issue VIII, these certificates also come with no limit on the amount that can be invested in them but there is a limit on the minimum investment, which is Rs. 100.
There are three types of holding NSC comes with; Single holder, Joint A type, and Joint B type
Single holder – This certificate is issued to an individual and can be held only by one person.
Joint A type – This certificate is one which is issue to two adult holders and is payable to both when the certificates mature.
Joint B type – This certificate is the same as the A type joint certificate this too can be issued to two adults who can hold and operate the certificates. However on maturity Joint B certificate is payable to only one holder, unlike that of in case of Joint A.
Features of NSC
These certificates can be taken by an individual and held as individual investments or taken and held as a joint investment. While there is a limit on who can invest in an NSC, there is no limit on the amount that a person can invest in an NSC. Since these products are meant for individuals, groups of people like companies, trusts, or Hindu Unified Families, cannot invest in them. There is a possibility where an individual can take NSC on behalf of a minor. The minimum amount that a person can invest in an NSC is Rs. 100. There are also specific denominations in which these certificates can be taken and these are Rs. 100, Rs. 1,000, Rs. 5,000 and Rs. 10,000 under NSC Issue IX. Investments cannot be withdrawn prematurely unless the case involves the death of the primary holders. Nomination facilities are also provided under both Issue VIII and Issue IX. The certificates can only be en-cashed at the post office where they were issued however, if the holder can provide sufficient evidence that he is entitle to the proceeds then they can be en-cashed as any post office.
Benefits of NSC
The interest can be virtually tax free except for the interest that is earned in the last year. There is no upper limit on the amount that can be invested in these certificates. If the certificates are lost or damaged, duplicates can be arranged for. Investments made in an NSC come under 80C of the IT ACT and afford the investor tax benefits. The interest earned is compounded and reinvested in the scheme by default which means that without purchasing extra certificates, you can increase the invested amount. When certificates mature, they can be reinvested in the scheme again by purchasing certificates of a value equal to the maturity value of the old ones. The certificates can also be taken on behalf of a minor. The investment can be used to secure loans.
Points to Ponder
It is possible to get a loan against NSC.
In case of loss or destruction of the certificate duplicate certificate can be made to issued.
NSC can be transferred from one post office to another and from one person to another.
NSC are not subjected to premature withdrawal unless in case of death of owner, or subjected to particular terms and condition.
National saving certificate is an India Government initiative and where any Indian citizen can invest money for fixed tenure and enjoy a good corpus at the end of the tenure with additional tax benefit on his regular income.