National Savings Certificate:

There are several investment options available today that extend a varied range of features and benefits. This allows individuals to pick an investment option that matches the requirement and financial goal of different types of investors.

NSC or National Savings Certificate is one of such investment option that helps investors to generate substantial earnings.

Regardless, to make the most of this investment option, individuals must find out about its features, benefits, and limitations in detail to make an informed decision.

National Savings Scheme – In A Nutshell:

Essentially, NSC is a fixed income investment option. It is an initiative of the Government of India to encourage the citizens of India to mobilise small savings and avail tax benefits.

 Individuals can open this scheme at a post office in any of these three ways –

  • In their own name
  • On behalf of a minor
  • Jointly with an adult

NSC in India serves as a useful tool for generating a steady income while exposing investors to limited risks. The best thing about a National Savings Certificate is that it provides guaranteed interest and capital protection. 

Eligibility Criteria Of NSC:

Typically, any Indian resident can become a beneficiary of the National Savings Scheme. However, if you belong to any of these categories, you will not be able to open an NSC

  • NRIs
  • HUFs
  • Private limited companies
  • Public limited companies

Individuals need to submit these documents to support their eligibility and initiate the process of opening NSC – application form, PAN, Voter ID, driving license, passport, government or senior citizen ID, etc. 

Features And Associated Benefits:

These are among the most significant characteristics of NSC in India

  • Risk And Reward

NSC helps individuals earn a steady income over the term of investment and also generates assured interest. This makes it an ideal investment option from the point of view of returns. Moreover, the fact the Government of India backs NSC makes it safer than most investment instruments. 

  • Cost Of Investment 

Individuals can start NSC in India with a minimum amount of Rs. 100. This makes the savings scheme an affordable investment option. On the other hand, there is no upper limit for investing in it; this means you can park your money into the scheme as and when required. 

  • NSC Interest 

The rate of interest accompanying NSC is revised periodically by the Government of India. Moreover, it gets compounded on an annual basis but is paid out on maturity. In case, investors decide to withdraw within a year of the issuance of NSC; they will not be entitled to receive interest. 

Moreover, post maturity if an investor does not redeem the NSC, he/she will earn interest on it for another 2 years. However, the same is offered at the rate of interest applicable to the savings account. 

  • Maturity Period

National Savings Certificate comes with a lock-in period of 5 years, which the individuals cannot exit, before completing 5 years. As a result, investors cannot withdraw prematurely from this scheme, unless under exceptional circumstances. 

  • Collateral And Nomination Facility

Leading financial institutions accept NSC as collateral for secured loans and help investors avail required financial assistance. The savings scheme also offers the nomination facility to the investors; wherein, one can nominate any one member of their family. 

  • Power Of Compounding

Once the interest earned on the National Savings Certificate gets compounded, the amount is reinvested by default. This helps to accelerate the savings significantly over the term of investment.

  • Tax Benefits

Individuals with an investment of Rs. 1.5 lakh in NSC are entitled to claim tax rebate as per the Section 80C of the Income Tax Act. 

You must note that NSC has its share of limitations as well, and one must become familiar with them to make an informed decision. 

Limitations Of NSC:

These pointers highlight the limitations of NSC

  1. It does not offer inflation-adjusted returns.
  2. The process of redeeming NSC before the maturity date is quite cumbersome.
  3. Premature withdrawals are allowed only in case of death, forfeiture by the pledgee or other special conditions. 
  4. Losing the physical copy of the National Savings Certificate complicates the process of redeeming it on maturity.
  5. Individuals have to wait for a long time to access the funds accumulated through this savings scheme. 

Nevertheless, investors who intend to park their money in a safe and profitable investment option may invest in Blue Chip company invoices through KredX

Doing so, individuals will be able to generate steady earnings within a short period through our online portal, without being exposed to substantial investment-oriented risks. However, before choosing any investment option, including National Savings Certificate, one must identify their financial requirement and risk appetite.