National Savings Certificate (NSC) is a popular post office savings scheme. It provides guaranteed returns as well as tax benefits under Section 80C. Financial planners recommend risk-averse investors to invest in this scheme as it is a plan to keep your money safe while offering a fixed return. The fixed return on this is higher as compared to other savings schemes. With this scheme, you can make your 10 lakh rupees to 14 lakh rupees. Let’s know the complete maths.
Best for Senior Citizens
According to personal finance experts, NSC can be used by senior citizens to get a consistent monthly income. Any individual can invest in this scheme either in his own name or on behalf of minors. Two people can jointly invest in NSC. Investment can be made in this scheme jointly or on a survivor basis.
What is the interest rate?
The government fixes the interest rate on NSCs every quarter. The interest rate on the National Savings Certificate for the current quarter is 6.8 percent. If you buy an NSC of Rs 1000 today at this interest rate, your investment will grow to Rs 1389 in five years. Any amount can be invested in NSC.
This is how 14 lakh rupees will be made from 10 lakh rupees
There is no maximum investment limit in this scheme. So, if you invest Rs 10 lakh in NSC now, your money will grow to Rs 13.89 lakh in five years.
An amount of up to Rs 1.5 lakh invested in NSC in every financial year is eligible for income tax deduction under section 80C of the Income Tax Act. The interest generated on NSC investments is reinvested every year and eligible for tax deduction up to a maximum of Rs 1.5 lakh every year as it accrues every year and is paid on maturity.
When will the tax be due?
When the NSC matures, the entire interest earned accrues to the depositor and becomes taxable. According to financial advisors, it is better for investors from the lowest income tax group. Keep in mind that no TDS is deducted on redeeming the certificate. NSC can be redeemed ahead of time only under circumstances. These include the death of the depositor, court order, or forfeiture by the pledgee. Another thing is that if it is redeemed within one year of purchase, then only the face value will be paid. If redeemed after one year but before three years from the date of purchase, interest is paid at the simple interest rate applicable to the post office savings account. On the other hand, NSC can be redeemed at a discounted value after three years of investment.