National Savings Certificates – How to invest?

As we know, there are a lot of options available when it comes to investing, and these investments have different features like risk, return, safety, etc. to cater to the needs of different types of investors. And we all know different people have different requirements. A risk-averse investor would seek capital safety, whereas a risk-seeking investor would want a maximum return. So let’s talk about the one option available to the risk-averse investor. I will tell you about ” National Savings Certificates.”

What is National Savings Certificates?

National Savings Certificates, known as NSC, in the 1950s Government of India, introduced a Savings Bond scheme to promote small saving and tax-saving in India.

The Government launched it to promote small saving habits and simultaneously use that fund for the growth of our newly independent country.

It is a part of the postal saving scheme; issued by post- office, which can be purchased from any branch of Indian postal office. And as India post office is easily accessible to the residents, it became very popular.

NSC is a Savings Bond, which means one earns a predefined interest during the period of holding. A person can purchase many certificates of any denomination issued in denomination of Rs 100, Rs 500, Rs 1000, Rs 5000, Rs 10,000.

The interest earn adds back, where it compounds annually until maturity. At the time of maturity, the investor submits the certificates and gets the amount invested plus the interest.

NSC has a five-year maturity period. There is no upper limit on the investment in the scheme, but an investment only up to Rs. 1.5 Lakh will fetch tax benefits under the I-T Act Section 80C.

Who should Invest in NSC?

The scheme was launched targeting individuals with medium or small savings, but it became trendy among the businessmen and government employees. So practically NSC is for everyone.

But, only Indian residents will be able to invest in the scheme. Therefore, Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) can not opt for NSC.

NSC is for people who can’t take the risk and are looking for tax saving. Since the Government of India backs it, it offers 100% capital protection guaranteed returns, save tax and is available at all post offices.

How to open National Savings Certificates?

It is available at all post offices, so for purchasing this scheme, you can go to your nearest post office and invest, and the same will be recorded in Passbook.

But if you have a Savings account with Post Office, you can buy an NSC certificate online only if you have internet banking access.

Earlier, physical certificates were issued. However, the sale of Pre-printed NSC certificates was discontinued in 2016. So no physically pre-printed NSC certificates will be issued Post Offices.

Now, the certificate has two modes, i.e., e-mode and Passbook mode.

ELIGIBILITY FOR National Savings Certificates

1. All Indian residents.

2. There is no age limit to purchase the certificate.

3. Karta of HUFs in his/her name only.

4. For a minor, you can even jointly invest with some other adult.

As I told earlier that NRI and HUF could not invest in NSC.

But if an Indian resident having purchased a certificate, subsequently becomes Non-Resident during the period of the period, the certificate will be encashed, meaning investors will be turned into saving account, on the day he becomes a non-Resident. Interest will be paid at the rate of the Post Office Savings Account, from time to time.


1. NSC application form filled adequately.

2. Proof of Identity

3. Proof of Address

4. Photograph

5. Investment deposit- cash or cheque

The minimum investment is ₹100, and there is no limit on the maximum amount.

Types of NSC Holding

National Savings Certificates can be purchased Single, jointly and on behalf of minors.

  • Single Holder Type. These certificates will be issued to the adults to be held by him/her. These certificates can be issued to minors also, but to be held by the adult.
  • Joint ‘A’ Type. NSC is issued to two adults where the maturity amount is payable to both holders or the survivor.
  • Joint ‘B’ Type. NSC is issued to two adults, and the maturity amount is payable to either of the holders or the survivor.

In the Joint Type certificate, only the first holder gets the benefit, subject to that he/she contributes the money out of his income chargeable to tax.

Interest accrued on the above investment will give tax benefit in the hands of the First Holder.

What are the Advantages of investing in NSC?

1. Guaranteed returns – The scheme gives a yearly return of 7.6% (currently 7.9%) offering guaranteed returns and fixed income. It’s compounding frequency is annual. Usually, its interest rate is higher than bank FD, but in FD it’s compounded quarterly, generally.

2. Minimum investment – You can start NSC as low as ₹100 or multiples. You can increase the amount as per your wish.

3. Capital Security – The Government of India gives her security to the capital invested. The capital is 100% secure.

4. Accessibility – It is straightforward to invest in the NSC just visit the nearest Post Office. Submit the required documents, and you have invested in NSC. If you have a saving account with Post-Office, you can do it online.

5. Loan security – NSC is accepted as a collateral document by Banks and NBFCs while applying for loans. Unlike Tax-saving FD, you cannot get a loan against it. A transfer stamp is required by the postmaster to transfer the account to the bank.

6. Nomination – Any member of the family, including the minors, can be nominated for against the scheme. A nomination is not required if the certificate is bought on behalf of a minor.


NSC comes gives tax benefits up to Rs. 1.5 Lakhs on the investment made under the Income Tax Act’s Section 80C. No TDS on the interest earned. You can Re-invest the interest earned in NSC to be eligible for tax benefit.

Therefore from 2nd year onward, the tax benefit can be claimed on the interest earned in the 1st year, and so on the 3rd and 4th year. Fifth-year interest earned is taxable as per the tax slab of the investor.

What is the NSC Disadvantage?

The only drawback with NSC is that the period available for investment is only five years, an earlier 10-year option was also available but in December 2015 government discontinued it. Comparing to FD, we have different investment horizons available, but in NSC, only five years are available.

Another drawback you can say is that it does not perform like Mutual Funds or National Pension Scheme, these schemes have given way better returns compared to NSC, ELSS fund has an average return of 12% annually on the period of 5 years.

You can still save tax by investing in these, but it comes with risk factors and extra lockin-period.

The Government fixes the interest rate for every quarter. And the interest is compounded Annually; it doesn’t give an inflation-adjusted return.

Withdrawals, Redemption, and Transfers in NSC?


NSC can only be redeemed at maturity. Withdrawals before maturity are not allowed except for in cases of death or critical illness (with court’s order).

Note that, if withdrawal is made within the one year from the issuance date of the certificate, then the encashment will be done only at face value of the certificate, no interest will be given to the investor.

But if made after one year, then interest will be received by the investor. But encashment will be at a discount of face value.


Upon maturity, the full corpus plus interest is given to the investor. There is No TDS in case of NSC. But on maturity, interest earned is taxable as per the income tax slab of the individual.

If the certificate has reached its maturity date and still not redeemed by the investor, in such a case, the investor is allowed to receive the interest of saving account, but on the simple interest rate basis and only up to a specified period of 2 years after the date of maturity.


If you want to transfer NSC to another person, both persons have to apply for a transfer of NSC.

The Post Office shall allow transfer after applying due diligence then online viewing to the new owner is enabled if e-mode used. The old owner will not be able to view the NSC.

If the Passbook is issued, then it will be re-issued in the name of the new customer by canceling entries in the old owner.

If you want to transfer to, another post office you have to fill the transfer form and submit it to the old post-office. Fill up the details and note that Nominee should be the same and only you can fill up this form if this not matured, Then the postmaster will put his stamp on it to complete the process.


There are many other options available for investment to get the Tax benefit. Still, these investments have to be chosen accordingly to the risk appetite and investment horizon of the investor. Not every investment is made for everyone.

NSC (National Savings Certificates) is a Government saving scheme it should be used in building long term wealth. It gives a fixed return and saves tax as well as a lock-in period of 5 years.


The above mention data are the best of my knowledge. Mentioned investment products carry risk. Please consult with your Financial Advisor before investing in National Savings Certificates.

Until then Happy Investing 🙂

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