NSC: Start investing with just Rs 100; get secure return of 6.8%

National Savings Certificate (NSC) is an instrument that offers a return of 6.8% and the facility of starting investment for as low as Rs 100, much lower than the cost of a pack of cigarettes. You can save for a period of 5 years.

Safe, secure

One can buy NSC online or offline from a post office. Banks generally don’t sale NSCs. One has to visit a post office to fill a form and buy an NSC.

It is a suitable for small and medium-income investors to save tax while earning returns. This is a secure and low-risk product.

NSC involves a lock-in of minimum 5 years. At its current interest rate, it takes 126 months to double the invested money.

The money which is invested in NSC gets income tax deduction under section 80C of the Income Tax Act, 1961.

Pros, cons

Being one of the safe and secure investment avenues, a number of people usually invest into this government-backed instrument.

But one should know the pros and cons of NSC before committing one’s money.

The first disadvantage is its 5-year lock in period that reduces liquidity. It is good medium-term instrument.

The interest rate of NSC can be revised every quarter.

The advantages are the low amount with which one can start investing. It is safe since returns are guaranteed by the government.

One can buy as many NSCs as one wants with any amount between Rs 100 and 10,000. It is tax free.

After maturity, NSC can’t be reinvested. One needs to withdraw the money along with the interest.

Any Indian above 10 years of age can open multiple NSC accounts.

Interest after maturity

There can be a case when a certificate has reached its maturity date and still not redeemed by the investor. In such a case, the interest is allowed to such investor only up to a specified period of 2 years after the date of maturity.

However, the interest for 2 years on such post maturity shall be on a simple interest basis.

Loans against NSC

One of the unique benefits of NSC is that it can be used as collaterals to get a loan. To secure a loan, the NSC certificates have to be transferred to the bank providing the loan.

A subscriber can get a maximum of 90% of the value of the amount of his/her NSC.

Preferred destination

Even in the age of equities and mutual funds, NSC has a decent customer base and is still growing.

“I have at least 2,500 customers right now, of which 80% have one or multiple NSC accounts. It is still one of the best bets. I know many families who are investing in NSCs since 1965,” said Nirmal Das, general secretary, West Bengal Small Savings Agents Association.