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Home / Money / Personal-finance /  De-jargoned: National Savings Certificate

This is a 5-year small savings scheme of the government. From 1 July 2016, a National Savings Certificate (NSC) can be held in the electronic mode too. Physical pre-printed NSC certificates have been discontinued and replaced with Public Provident Fund-like passbooks.

What’s on offer

The minimum amount you can invest in them is Rs100 and there is no upper limit. Under this scheme, all deposits up to Rs1.5 lakh qualify for deduction under section 80C of the Income-tax Act, 1961. The interest earned is taxable.

You can invest in multiples of Rs100. These certificates can be owned individually, jointly and also on behalf of minors.

The interest rates for all small savings schemes are released on a quarterly basis. The effective rate for NSC from 1 October to 31 December is 8%. The interest is calculated on an annual compounding basis and is given along with the invested amount on maturity. So, if you invest Rs100 for 5 years, you will get Rs146.93 on maturity, as per the latest rates. Premature withdrawal conditions are stringent, such as: death of the certificate holder or by the order of a competent court.

Issue modes

To buy an NSC, you have to go to your nearest post office with two photographs, and proofs of address and identity. Fill up an application form. Write a cheque for your amount, favouring the post master general of that city.

Earlier you were issued paper certificates, now you will be issued a passbook, which will mention the name and details of your investment, including the maturity date.

You can also hold the NSCs electronically. To avail this facility, before you buy an NSC, you must have a savings account with a post office and internet banking should be enabled on it.

Is it for you?

While NSCs offer the taxpayers a tax rebate for investing in them, they are a highly illiquid mode of investment.

In case you need to access these funds in an emergency, you will not be able to do so.

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