Some details about the National Savings Certificates:
To avail the NSC Certificate : To avail the NSC,
you can visit nearby or any post office and ask for NSC account, they will
assist you in understand the terms and conditions and provide the application
form. No fixed limit available in NSC
certificate even you can buy NSCs certificate starting from INR 100 also.
Lock-in Period:
There is a 5 years lock-in period for every NSC investors and you can’t
withdraw amount during this period.
Interest Rate: The
rate of interest on NSC is decided by the government and can change regularly. The interest receiving on NSC is compounded
and end of year added to the principal amount.
The interest rate is comparatively higher than the regular savings
accounts.
Tax Benefits:
NSC investors are eligible for tax benefit under section 80C of the Income Tax. Interest earned on principle is eligible for
a tax deduction and depends upon the taxable income slab.
Maturity: After
the 5 year lock-in period NSC gets mature and you can allow to redeem the certificate. The maturity amount include your principle
along with interest you earned.
Transferability: National
Saving Certificate is a easily transferable from one investor to other, also
you can transfer the certificate from one post office to another post office
according to your need.
Nomination:
You can nominate someone to receive the proceeds of the NSC in case of your
untimely demise.
Mortgaging:
You can mortgage NSC to avail loans from any financial institutions.
Premature Withdrawal:
Premature withdrawals are allowed only if the death of the certificate holder.
Example :
Surekha
is a 27-year-old married woman who resides in a modest mud-made room. She earns
a monthly income of Rs. 15,000 through her tailoring work at home and manages
to save Rs. 1,000 from her earnings each month. Her primary objective is to
accumulate savings over the next 5 years in order to fund the repair of her
home. One day, her friend Shilpa paid her a visit and introduced her to the
National Savings Certificate, explaining how it could assist her in earning
interest on her savings. Intrigued by the scheme, Surekha decided to invest in
National Savings Certificates to safeguard her savings and benefit from a fixed
return alongside interest.
Investment Amount: Surekha plans to invest what she saved monthly during tailing work. She decides to buy NSC worth of Rs. 50000 for 5 years.
Interest Rate: At the time of Surekha’s investment the interest is 6.8%, it is compounded annually.
Investment Calculation:
Total Investment over 5 years : Rs. 50,000
Maturity
Calculation (After 5 Years):
Using
the assumed annual interest rate of 6.8%, here's how Surekha’s NSC investment
could grow over the 5-year period:
Principle
amount : Rs. 50,000.00
Total
Interest Earned : Rs. 17,000.00
Total
Maturity Amount after 5 years: Approximately Rs. 67,000.00
Tax Benefits:
NSCs also offer a tax benefit under Section 80C of the Income Tax Act. Surekha can claim the invested amount, which helps in reducing her tax liability.
Conclusion:
The
low income category Investors like Surekha, National Savings Certificates
assured fix return and reliable option for her savings. In this example, Surekha has invested fixed
amount Rs. 50000 in NSC over 5 years helps her accumulate a substantial amount,
which can be used to achieve her financial goal. Also She gets relief on her tax
liability.
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