National Savings Certificates Tax Benefits

National Savings are specifically designed for businessmen and salaried employees and produce a fixed income similar to fixed deposits. National Savings Certificates provides tax benefits apart from a number of other benefits it offers.

The National Savings Certificates (NSC) offered by the Government of India is one of safest investment tools available at all Indian post-offices. These certificates are designed for salaried employees and businessmen, and they produce fixed income like fixed deposits. Any individual can invest for up to 10 years under this scheme. There are two different issues of NSCs made available by the Government of India which include NSC- VIII Issue and NSC IX Issue. A person can invest for 5 years in NSC (VIII Issue) and 10 years in NSC (IX Issue). Every year in April, the Government of India set a fixed rate of interest for National Savings Certificates. Currently, 8.5% is applicable for NSCs bought for a 5 year term and 8.8% for a term of 10 years. These interest rates will remain fixed for the whole term of investments. NSC are available at all Indian post offices; they can be purchased singly, jointly and on behalf of minors.

NSC Tax Benefits

Apart from the aforesaid benefits, the NSC also offer tax benefits. Listed below are the tax benefits available under the National Savings Certificates:

  • Since the interest earned from National Savings Certificate is not paid to the account holder/investor directly and is reinvested, a taxpayer/investor can claim for tax deduction on the interest amount. First, they need to show the interest as income and then claim income tax rebate on it under section 80C of the Indian Income Tax Act.
  • A yearly investment up to INR 1, 00,000 qualifies for income tax rebate under NSC.
  • There is no tax deducted source.

NSC certificate tax benefits can be availed by all salaried individuals and businessmen who come under income tax assessment. Interest earned from investing in National Savings Certificates can be shown under the category called “Interest from other sources”.

How to calculate NSC tax

An NSC Tax Calculator can help you calculate the taxable amount on you interest. Once you enter the following details in an NSC Tax Calculator – date of purchase of NSC, total NSC amount, total years of completion after purchase and the applicable rate of interest, the calculator will reveal the total accrued interest and interest accrued in the previous years. Based on results shown by the calculator, you can claim your income tax rebate.

Key benefits of investing in NSCs

Backed by the Government of India, the National Savings Certificates serve as the safest means of investment and come with a lot of attractive benefits. Listed below are the benefits offered by NSC:

  • Attractive interest Rates: NSCs offer attractive rates of interest on your savings. You can receive interest up to 8.5%.
  • Assured returns: Investors can receive assured returns by investing in NSC for 5 to 10 years.
  • Minimum/maximum limit of investments: You can invest as minimum as Rs.100. However, there is no maximum limit for investment under NSCs.
  • Loan against NSCs: Banks allow loans against NSC certificates. Individuals can use National Savings Certificates as collateral to get loans.
  • NSC Denominations: National Savings Certificates are issued in different denominations such as Rs. 100, Rs.500, Rs.1000, Rs. 5000 and Rs.10, 000. A person is free to purchase any number of NSC as per his/her convenience.
  • NSC Certificate Transfer: The NSC can be transferred from one individual to another, if the certificate holder intends to transfer.

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