National Savings Certificate – A good option for conservative investors

NEW DELHI: With the buzz around stocks, mutual funds and cryptocurrencies, conservative investors are faced with the dilemma of deciding where to invest their money. The various instruments under the Small Savings schemes by the Government are the solution for such investors. The National Savings Certificate, or NSC is a fixed income instrument that falls under the central government's Small Savings Scheme. The NSC was floated for small and middle-income level investors as a secure and low risk investment.

Nishith Baldevdas, a Sebi Registered Investment Advisor and Founder of Shree Financial said, ”The NSC is a great option for conservative investors because it gives assured returns. Since it is backed by the Government there is no risk of default. The biggest advantage of the NSC is the tax benefit. Not only do you get an exemption of up to ₹1,50,000 under section 80C, no TDS is also payable”, he explains. Investment in NSCs is eligible for tax deduction of up to Rs1.5 lakh per annum. Interest received on this invested amount can also be counted for the tax deduction subject to the overall ceiling of Rs1.5 lakh per annum.

Thus for investors who wish to invest in low risk, guaranteed returns and tax saving instruments, the NSC is a good option. Such investors must keep in mind the following points before investing in NSC-

· Any Indian citizen individually or jointly or on behalf of a minor can invest in the NSC. Non-resident Indians, Hindu Undivided Families and Trusts are not eligible to opt for this scheme.

· If you wish to invest in the NSC, the minimum amount you can invest is Rs100 and there is no maximum limit.

· To invest in the NSC you will have to visit the nearest post office as there is no online facility for investing in NSC.

· The tenure for the NSC is 5 years and you earn interest of 6.8% per annum. While the interest is compounded annually it is payable to the investor only on maturity. That means, say you invest ₹100 today, at the end of 5 years you will receive ₹138.95.

If the above features, do appeal to an investor, then NSC is an investment worth exploring. According to Baldevdas, “The NSC is a great option for senior citizens who not only get a low risk guaranteed return investment but can also save tax simultaneously. Housewives who have some savings can park their money in the NSC and start their investment journey. Young adults must not focus just on equity. Investing in the NSC will help them understand fixed income instruments and develop investing discipline due to the 5 year tenure.”

If you do fall in these above categories or are simply a conservative investor, you can invest in the NSC. While the NSC interest rates have been consistently falling in the past few years, the interest received is still more than most bank FDs and has a tax benefits too.

(Listen to our podcast on the National Savings Certificate)