Exploring Tax Benefits with National Saving Certificate

Many of us often look for ways through which we can save tax. One of the most popular ways to save tax in India is by acquiring an NSC certificate. The NSC is short for National Saving Certificate. It is a government-backed scheme open to residents of India. In this blog post, we will discover the tax benefits of the National Saving Certificate. By enrolling under this scheme, you can save tax and increase your wealth in a steady manner. 

What is National Saving Certificate?

National Saving Certificate is a savings cum investment scheme offered by the Government of India through post offices. NSC is considered one of the most secure investment options that offers an attractive interest rate. The objective of the National Savings Certificate is to provide decent returns to investors while saving their tax to a certain extent.

NSC Maturity Period & Withdrawal Conditions

At present, the maturity period of the NSC certificate is fixed at 5 years. It is a lock-in investment scheme, meaning that the investment cannot be withdrawn before reaching the maturity period. 

However, NSC can be prematurely withdrawn in certain circumstances, including:

• In case the NSC holder passes away.
• If an order is given by the court.
• If a gazetted government officer pledges for the account to be forfeited and the pledge is in accordance with the NSC rules.

If the NSC is withdrawn within 1 year of the account’s opening, only the money deposited will be returned; no interest will be gained on the withdrawn amount. However, the entire contribution and interest are paid if the withdrawal is made after 1 year. 

Latest NSC Interest Rate (January 2025 to March 2025)

National Saving Certificate rates are revised by the government every quarter. For the quarter ending March 2025, the NSC interest rate is fixed at 7.7% p.a., compounded annually.

Eligibility to Gain Tax Benefits with National Savings Certificate

To find out whether you’re eligible for National Savings Certificate, check out the eligibility requirements below:

• The applicant must be an individual, meaning Hindu Undivided Families (HUFs) and trusts cannot apply.
• The applicant must be a resident of India. Non-Resident Indians (NRIs) cannot apply for National Savings Certificate. 
• If the scheme’s beneficiary is a minor or a person of unsound mind, the guardian must apply under the NSC scheme on their behalf.
• A minor can open a single holder type account on their own if they are at least 10 years of age. 

Deposit Rules for NSC

The following deposit rules apply to NSC accounts:

• To open the NSC account, a minimum of Rs. 1000 must be deposited. 
• Any sum in multiples of Rs. 100 may be deposited in the NSC account after initial minimum deposit 
• There is no maximum limit for the amount that can be deposited under the National Savings Certificate account. 
• An individual may open multiple NSC accounts.

National Saving Certificate Tax Benefit

The National Saving Certificate is a low-risk investment scheme offering tax benefits under the Income Tax Act, 1961. The key tax benefits of National Saving Certificate are as follows:

• The principal amount invested in NSC qualifies for tax savings up to Rs. 1.5 lakhs annually under Section 80C of ITA 1961. 
• The interest earned on NSC annually, for the first four years is eligible for a tax break, subject to the overall annual limit of Rs. 1.5 lakhs. This is because the interest is reinvested in the National Savings Certificate scheme, and is therefore exempt from tax. 
• No TDS is deducted on NSC interest, unlike FD interest.

Conclusion

The National Savings Certificate is a government-backed scheme that allows investors to accumulate wealth and reduce their tax liability. The NSC interest rate is revised by the government every quarter. For the quarter ending March 2025, the national saving certificate rate is 7.7% p.a., compounded annually. To apply for NSC, you can visit any Indian Post Office near you.

Frequently Asked Questions

Q.1 Who issues National Saving Certificate?

National saving certificate is issued by the Government of India through Indian Post Offices.

Q.2 What is the lock-in period for National Saving Certificate?

NSC has a lock-in period of five years. 

Q.3 What is the minimum investment amount under National Saving Certificate Scheme?

The minimum investment amount under the National Saving Certificate Scheme is Rs. 1000.

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