NSC is National Savings Certificate. It is a fixed savings income scheme that can be opened at the post office. Due to the number of post offices present in India and the easy access to these post offices, the scheme has become very popular in India. The major aim of this scheme is to make small or medium savings, as well as tax benefits provided for these savings.
Features of NSC –
NSC has an interest rate of 6.8% per annum. You can invest a minimal amount of 100 Rs as an initial investment. Interest earned gets compounded annually and reinvested by default but will be payable only at maturity. The investor can nominate any family member (even a minor) so that they can inherit it in the case of an unfortunate event of the investor’s demise
The maturity period for NSC is 5 years. Premature withdrawal under certain circumstances is also allowed.
Advantages of NSC –
NSC has a lot of benefits that individuals can avail of. The returns are also guaranteed under this scheme and thus many individuals prefer the NSC scheme as it can provide a regular income once they retire. Except for the interest that is earned in the final year, the remaining interest that is generated is tax-free. Also if the original certificate is lost, a duplicate can be generated as well. One of the important features is that after the maturity period, individuals have the option to continue investing in the scheme. The interest that is generated is compounded on a yearly basis and reinvested towards the scheme. Therefore, the invested amount of the individual increases without purchasing certificates.
Tax benefits provided by the NSC –
Under Section 80C of the Income Tax Act, 1961, tax benefits of up to Rs.1.5 lakh can be availed by investing in the NSC.
The interest that is generated on a yearly basis by investing in the NSC is considered a new investment for tax benefits.
Tax Deducted at Source (TDS) is not applicable under the National Savings Certificate. However, as per the marginal income tax rates, the tax must be paid for the interest that is earned.
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