• All about National Savings Certificate (NSC) withdrawal rules

    One of the popular small saving schemes in India, the National Savings Certificate (NSC) offered via post offices across the country provides guaranteed returns (backed by the government) along with tax-saving benefits and regular payouts. The National Savings Certificate is, therefore, a sought-after investment option for retirement planning in India.

    Some of the common features of the National Savings Certificate are listed below:

    • Types of Accounts: There are three types of NSC accounts available, namely single holder, joint certificate A and joint certificate B.
    • Tenure: NSC VIII has a tenure of 5 years whereas NSC IX has a 10-year duration.
    • Investment: The minimum investment required under this scheme is Rs.500 while there is no limit to the maximum
    • Denomination: An investor can buy NSC certificates of any denomination (e.g, Rs.100/500/1000/5000/10000)
    • Interest: The interest is compounded on a half-yearly basis. NSC VIII and NSC IX are currently being offered at 8.5% and 8.8% respectively.
    • Tax: For NSC VIII, investment up to Rs.1 lakh qualifies for tax rebate. The interest earned by the investor is reinvested in this scheme itself in that interest can be categorised under the head ‘Income from other sources’. As a result, an account holder or an investor can claim tax deduction on the interest earned as per section 80C of IT Act, 1961. No tax deduction at source. It is important to note that the total interest income earned at maturity of the scheme is not tax-exempt.
    • Transferability: The transfer of NSC VIII and NSC IX from one individual to another is permitted once from the date of issue of the scheme till its maturity.
    • Maturity: If the maturity proceeds are not withdrawn by an account holder, the scheme becomes available for post office savings scheme interest for 2 years.
    • Nomination facility is available under this scheme.
    • Online facility is not available.
    • Investors can avail of loans by using NSC as collateral

    NSC Withdrawal Rules

    An investor or account holder has to aware of the following NSC withdrawal rules

    • An account holder can withdraw and encash his NSC certificate at any post office across the country and need not necessarily be restricted to the post office where he or she received the NSC (provided a transfer form is submitted).
    • There are two kinds of NSC withdrawal or encashment options available for investors, namely, premature encashment and withdrawal at maturity.
      • Premature encashment: Allowed in mainly three reasons as listed below:
        • Death of the holder/holders
        • Order by a court
        • Forfeiture by a pledge (government officer)

    If encashed after a year of being issued, the certificate’s face value is paid to the account holder. If encashed within three years from the issuing date, the certificate’s face value and simple interest is paid to the investor.

    • Maturity encashment: Upon completion of 5 years for NSC VIII and 10 years for NSC IX, the maturity proceeds can be encashed.

    Documentation Required for National Saving Certificate

    The documents required for encashment are listed below:

    • NSC encashment form
    • NSC certificate (original)
    • Proof of identity (driving Licence, voter ID)
    • Signature of the nominee on the certificate is required. Attestation by a guardian is mandatory in case a certificate is purchased on the behalf of a minor. If there are no nominees, the legal heir can opt for encashment upon submission of form SB84. In the event of the death of the account holder, the nominee can opt for encashment by submitting the following forms:
      • Annexure 1: Claim settlement application (registered at a post office)
      • Annexure 2: Claim settlement application (legal evidence)

    Important NSC Related Reads

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