DECEMBER 24, 2021
National Saving Certificate (NSC) Interest Rate 2022-23: NSC is a popular savings instrument with decent and guaranteed returns. Issued by the Government, NSCs come with a lock-in period of 5 years. The interest is compounded annually but paid to the subscriber on maturity. Even Prime Minister Narendra Modi has some of his earnings invested in NSCs.
You can use NSCs for making small and medium savings. If planned wisely, these certificates can also be used for a regular monthly income. (See NSC Interest Calculation below). Experts say that NSC is suitable for conservative investors who want to accumulate wealth while preserving their capital.
Where to buy NSC
You can purchase National Savings Certificates at the post office.
Who can buy NSCs?
An individual can purchase NSC on his/her own account or on behalf of minors. NSCs can be held jointly by up to two joint holders on joint basis or either or survivor basis.
NSC Interest Rate 2022
The current interest rate offered by the Government on National Savings Certificate is 6.8%. The Government of India revises interest rates of NSC and other savings schemes on a quarterly basis. Therefore, the NSC Interest Rate 2022 (first quarter of New Year) will be known on December 31, 2021.
NSC Interest Calculation
As per the current interest rate, the value of an NSC worth Rs 1000 today would grow to Rs 1389.49 after five years.
If you purchase NSCs for Rs 1 lakh today, the value of your holding will grow to Rs 1.38 lakh after 5 years.
As there is no maximum limit, you can purchase NSCs for any amount you want. If you purchase NSCs for Rs 5 lakh today, the value of your holding will become Rs 6.94 lakh on maturity after five years.
The interest on NSCs is compounded annually but paid at maturity. That means, if you buy NSCs for some amount, say Rs 10,000, every month for five years, you can earn interest of Rs 3895 + principal Rs 10,000 every month for the next five years. After five years, if you reinvest the principal amount every month, you will continue to earn Rs 3895/month from these certificates till you continue to hold them.
Minimum and Maximum deposit limit
You can purchase NSCs in denominations of Rs 100, 500, 1000, 5000, and 10,000. The minimum amount required is Rs 100. There is no limit on the maximum amount you can invest in NSC.
NSC Tax Benefit
Amount invested in NSC enjoys Income Tax benefits under Section 80C. The accrued interest is taxable but it is deemed to be re-invested. Therefore the interest also becomes eligible for deduction under Section 80C (subject to the prescribed ceiling under this section).
At the time of redeeming the certificate value, no TDS is deducted. However, the interest income earned is fully taxable in the hands of the investor depending on the income slab.
NSC Transfer Rule
Transfer of NSCs is allowed. They can be transferred from one person to another person. For transferring NSCs, the consent of a designated official of the post office is required in situations like transfers to heir of a deceased holder, under a court order, to a near relative such as wife, or transfer to a bank, housing company or to other institutions as security.
NSC premature encashment
NSCs can be redeemed prematurely in case of death of the holder, under court orders or forfeiture by a pledgee. Only the face value is paid if the NSCs is encashed within one year from the date of purchase of NSCs. The simple interest rate applicable to the post office savings account is paid if encashment is made after one year but before three years from the date of purchase of the certificates. The certificates can be encashed as a discounted value after three years.
NSC Nomination Rule
NSC holders are allowed to declare a nominee. This can be done at the time of purchasing the certificates or even at a later stage. It is important to note that nomination is not allowed on certificates held on behalf of a minor. The facility to change or cancel nomination is also available.
5 Key Benefits of NSC
- Use as collateral
- Use for tax-saving
- Returns guaranteed by Govt
- Decent interest rate
- Low Risk Investment Option
NSC as collateral
You can use the National Savings Certificates as collateral for taking a loan from any financial institution or bank.
Who cannot purchase NSCs?
As per rules, NSCs cannot be purchased by NRIs, HUF, companies, trusts, societies or other institutions. In case an individual becomes an NRI after purchasing the certificate, s/he can hold it till maturity on a non-repatriation basis.
Courtesy/Source: The Financial Express