Earn 7.7% interest: What are the tax benefits of NSC

One of the government-backed schemes appropriate for low-risk investors is the National Savings Certificate (NSC), which provides assured returns and tax advantages. NSC certificates can be bought in electronic mode or passbook mode.

What is the rate of interest in NSC for this quarter?

For the quarter ending in April to June of 2024, the National Savings Certificate’s interest rate is 7.7%. The interest rate is subject to quarterly changes which is reviewed by the Ministry of Finance.

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What are the tax benefits of National Savings Certificates

Tax deduction on the amount invested

Anyone looking to invest with assured returns and avoid taxes on up to Rs 1.50 lakhs under Section 80 C of the Income Tax Act would find it suitable.


Save tax on Interest

According to the Futuregenerali website, “Interest earned on NSC is taxable under the head “Income from Other Sources”. However the interest is reinvested for the initial 4 years and therefore will not be chargeable to Income Tax and this reinvestment will be allowed as deduction u/s 80C of the Income Tax Act, 1961. Since the maturity period of NSC is five years, the interest can be re-invested only for four years. The interest earned in the fifth year comes in the hand of investor along with the maturity amount. So basically, the tax benefit is availed only on the initial first four years of the investment period. The interest earned in the fifth and final year is taxable.”

TDS

TDS is not applicable on the interest amount of NSC, unlike fixed deposit.

Who can invest in NSC?

Resident Indians can invest in NSC. You can jointly invest with up to two adults. NSC can be bought in the name of a minor as well. You can invest in NSC online through the Department of Post internet banking. You can also visit your nearest post office branch to buy National Savings Certificate through other payment modes including cash, cheque, and bank demand draft.

NSC lock-in period

NSC has a five-year lock in term. There is no option to liquidate your NSC account prematurely, except in the event of depositor death, on forfeiture by a promise from a Gazette officer, or a court order it can be liquidated.

Premature closure

NSC may not be prematurely closed before 5 years except the following conditions : –

a) on the death of the account holder in a single account, or any or all the account holders in a joint account;

(b) on forfeiture by a pledgee being a Gazetted Officer, when the pledge is in conformity with this Scheme;

(c) when ordered by a court.

How to open NSC online in through Post Office internet banking

Step 1: Login into DOP internet banking .

Step 2: Under ‘General Services’ >’Service Requests’ > ‘New Requests’ .

Step 3: Click on NSC Account – Open a NSC account and KVP Account to open a KVP account.

Step 4: Enter Amount for which NSC to be opened minimum is Rs 1000 and in multiple of < 100) .

Step 5: Select the Debit Account linked PO Saving Account

Step 6: Click on ‘Click Here’ to read terms and conditions and accept terms and conditions .

Step 7: Submit online

Step 8: Enter transaction password and submit.

Log in again to view the details of NSC opened under ‘Accounts’.

Harry Byrne

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