NSC Calculator

An NSC can be bought by resident Indian individuals. Thus, a trust and HUF (Hindu Undivided Family) or any other non-individual person such as a company cannot invest in an NSC. An NSC can be bought in a sole capacity or can be bought jointly by individual investors. Individual investors with a low risk appetite looking for assured returns may purchase an NSC. Nomination facility is available in an NSC.

The NSC is one of the post-office saving schemes backed by the Government of India. It entails a sovereign risk. In other words, there is little scope for default. Returns are assured and investments in NSC are considered to be safe.

NSC pays a 6.8% rate of interest at present. The rate contracted at the time of issue of the NSC does not change till the NSC matures. The interest is compounded yearly but paid at the time of maturity. The rate of interest payable on an NSC is more attractive now as compared to five-year bank deposits or company deposits with similar risk profiles. The Government of India reviews the rate of interest payable on all small saving schemes, including NSC, once in every quarter. Hence the rate of interest payable on NSC may change from time to time and investors would be better off if they confirm the rate of interest at the time of their investments.

Investment up to ₹1.5 lakh in an NSC in a financial year can be claimed as deduction under section 80C of the Income Tax Act, 1961. If an NSC is bought jointly then the first investor can claim the tax deduction. Investors can also claim deduction on the interest accrued on the NSC each year till the end of the fourth year. The interest paid on an NSC is taxable in the hands of an investor according to the tax slab rate.

To invest in an NSC one has to go to the nearest post office. Investors need to  fill up relevant forms, attach relevant documents, complete the Know Your Client (KYC) process and make the payment. The post office issues the NSC, after evaluating the form and realizing the payment. NSCs are not issued online.

There is no provision for premature withdrawal from an NSC. The money gets locked in for five years. Premature withdrawal is allowed only in the case of death of the holder or in case of an order of a competent court.

Loans can be raised against NSC. This provision ensures that there is scope for interim liquidity, by pledging anNSC. Many nationalised, private sector and co-operative banks offer loans against an NSC. Depending on the tenure of an NSC, loan to value ratio is decided. If an NSC has been there for more than three years, then as high as 80% of the value of NSC is offered as loan. In case an NSC has run for a year or so, then a lower loan to value ratio is applied. The tenure of a loan is limited to the extent of the time to maturity of an NSC. For example, if an NSC has run for 3.5 years then the loan tenure cannot exceed 1.5 years. A borrower can either repay the loan in equated monthly installments or can make final payment with interest.

An NSC matures at the end of fifth year from the date of issue. An NSC holder has to fill up a form, surrender the original certificate duly signed by all holders, and establish his/her identity. The post office immediately pays the NSC holder or the funds are transferred to the NSC holder’s bank account.