Tax Saving Tuesday: NSC

All about the National Savings Certificate

Hello and welcome to another edition of The Stable Investor!

Last week, we explored the Sukanya Samriddhi Scheme. Today we continue with the fourth instalment of Tax Saving Tuesdays with a breakdown of the National Savings Certificate (NSC).

A Broad Overview of NSC

The NSC is a fixed-income investment scheme that the Indian government started back in 1989. The National Savings Certificate (NSC) currently has an interest rate of 7.7% per year, with a five-year maturity.

You can start saving with just ₹1000 and there's no limit to how much you can invest with NSC. You can also deduct up to ₹1.5 lakh from your taxable income using NSC, which is a part of the tax-saving Section 80C of the Income Tax Act, 1961.

NSC is a low-risk investment backed by the government. It guarantees returns and offers a fixed interest rate.

The interest you earn on NSC for the first four years is automatically put back (interest deductible under 80C) into your investment, helping it grow without you having to pay any tax on this interest. Only the interest you earn in the final, fifth year is taxed. This makes your savings grow faster and more tax-efficiently in the initial years.

The How-To of NSC Investment

Investing in NSC can be challenging due to a cumbersome booking process with the post office. However, purchasing NSC has become much more convenient since July 2016 when the era of physically pre-printed certificates ended. Now, you can either visit a post office or access your bank's internet banking to purchase NSC.

Navigating Through the NSC

Each NSC certificate is your unique financial fingerprint, embedded with a distinct number that embarks on a 5-year maturity journey. The interest on your investment weaves itself back into the principal for the initial four years, embracing the power of compounding. As the maturity period culminates, the fifth-year interest stands ready to be recognized under "Income from Other Sources" in your tax filings.

The Perks of NSC

The main benefits of the NSC are fixed and guaranteed returns, and tax advantages. With a 5-year tenure, NSC interest rates are set quarterly by the government, ensuring your returns keep pace with the economy.

NSC holders can also nominate a loved one, should anything untoward happen to them. NSC also stands as worthy collateral for loans, making it not just an investment, but a multifaceted financial tool.

Eligibility and Documentation

All resident Indians can buy an NSC. You'll need to fill out the NSC Application Form and accompany it with your KYC documents — identity and address proofs, along with your investment cheques or cash.

---

---

NSC's Performance Review

Comparing NSC with the likes of ELSS, PPF, and other tax savers, NSC maintains a low-risk profile with a fixed, handsome return. It may not match market-linked returns but provides a steadfast rhythm of growth and security.

That’s all for today, see you here, next week!

---

Weekly Quiz

A quiz that will have 4 questions, one every week, all linked together by a certain theme.
Write back to us guessing the answer and the theme. A lucky winner who guesses all four questions and the theme correctly will get a free hamper from us.

Quiz Question
Headquartered in Bangalore, this company was established in 1940 in association with the erstwhile Kingdom of Mysore. It’s Board of Directors is appointed by the President of India and it’s products take the pride of place during Republic Day celebrations.
Name the company and guess the theme.

---

On another note, our partner bank Shivalik SF Bank has recently increased its rates and currently offers the highest rate on our app at up to 9.20% p.a.

Best,

Team Stable Money