Lets take a closer look at the National Savings Certificate. An investment options that comes with reasonable returns, high levels of safety plus income tax benefits. The author has detailed out the features and benefits of investing in NSC. Happy investing. Team RetyrSmart
National Savings Certificates: An investment with peace of mind attached
How to replace lost NSC certificates
What are National Savings Certificates?
National Savings Certificates, or NSC, were introduced soon after Independence to encourage small savings among Indians, and to collect funds for nation-building. NSC was very popular then, and continues to retain its popularity today, despite the plethora of options available to investors today. This scheme is part of the postal savings system of the Indian Postal Service.
Features of National Savings Certificates
Here in a nutshell are the features of NSC:
- The tenure is for a period of five years.
- Individuals, joint individuals and minors supported by guardians can invest in the scheme.
- You can invest in multiples of Rs 100, and there is no upper limit.
- Hindu Undivided Families (HUFs), trusts and companies cannot invest in NSC.
- NSC accounts are available in three types – single holder, joint certificate A and joint certificate B. Joint certificate A is payable to both holders in maturity. In joint certificate B, the amount on maturity is payable to either of the two holders.
- National Savings Certificates can be used as collateral for loans.
- Only Indian residents are eligible to invest in NSCs.
- Investments can be prematurely withdrawn only on the death of the primary holders.
- You can encash NSC on maturity at the post office you bought it from. However, you can transfer the NSC to any post office across the country.
- Interest rates are revised every quarter according to the prevailing rate of government bonds. But this is applicable to new investors only. If you have purchased NSC at the prevailing rate, that rate will remain unchanged for the five-year tenure.
- No age has been specified for investments in National Savings Certificates. However, minors may need to have a guardian’s consent.
Advantages of investing in National Savings Certificates
- Safety: Since it’s backed by the government, there is no risk involved.
- Good for small investors: The minimum investments are quite small (Rs 100), so even those with very small investible surpluses can invest in this scheme.
- Tax benefit: There’s of course the income tax benefit under Section 80C of the Income Tax Act that enables you to reduce your taxable income by up to Rs 1.5 lakh.
- Decent returns: Considering the safety aspect and the tax advantages, interest rate on NSCs, which are slightly higher than bank FDs, are fairly attractive.
- Convenient: Since no post office is a few metres away from any Indian, it’s very convenient to invest in NSCs. You can invest in them wherever you are in the country, even in rural and remote areas.
- Collateral: You can use NSC as collateral to take loans. This gives some amount of liquidity to this instrument.
- Regularity: Since the amounts needed to invest are quite small, you can put cash in NSCs whenever you have some cash. This ensures you make optimum use of your money and leave no spare cash lying around. You can invest every month, quarter or year. You can plan the investments so that the National Savings Certificates mature at regular intervals, providing you a steady income, say, after retirement.
How to open an NSC account
You can open an NSC account at any post office in the country.
- Fill the application form that is available at the post office.
- You need to take original proof of identity and address and two photographs along with you.
- You can buy certificates in multiples of Rs 100. These can be purchased at the post office and can be paid in cash, draft or cheque. The cheques or drafts have to be made in favour of the postmaster of the post office from where you bought the NSC.
How to encash NSC after maturity
The National Savings Certificates that you have purchased can only be encashed at the post office you have bought it from. However, there is a transfer facility available, which enables you to transfer the NSC to the post office of your choice. Here’s what you need to encash NSC.
- Original copy of the NSC certificate
- Proof of identity – Aadhaar card, passport, or driving licence
- NSC encashment form
- If you are the holder of the NSC, you will have to sign on the back of the NSC to show that you have received payment from the post office
How to transfer NSC
As we mentioned earlier, NSC can be transferred to the post office of your choice across the country. If you have moved from your earlier residence, it’s better to do the transfer so that it’s more convenient to encash the certificates on maturity.
- You will need to fill an application form at the post office you bought the certificates from to make the transfer. The form is available at the India Post web site.
- You will need to fill details like name, number of NSC, date of issue.
- If you have purchased it on behalf of a minor, you will need date of birth of the minor and the guardian’s name
- Signatures of the NSC holder as well as the nominee are required.
- You will also have to give details of the nominee, including name and date of birth.
- The postmaster will then verify the details, sign the form and send it to the post office you have requested.
- You can also redeem the NSC at any post office without making a transfer, but the process could take as long as one-and-a-half months.
- You can only do the transfer before the National Savings Certificates have matured.
How to replace lost NSC certificates
You can encash NSC after maturity only if you produce the certificate. Here’s what you do if your certificate is lost or destroyed.
- File an FIR: You will have to file an FIR at the nearest police station, and get a copy of the FIR
- Indemnity bond: Get an indemnity bond from a notary public printed on Rs 100 non-judicial stamp paper for the issue of a duplicate certificate. This is not needed if the certificates are only mutilated/damaged and not lost.
- Get the form: You will need to get an application form. This is available at the India Post web site. You can download it here.
- Fill in details: You will need to fill in details like name, serial number of the certificates, date of issue, denominations, name of the post office where the certificates were issued.
- Identification: You will need proof of identity as well as someone who will vouch for your identity.
- Submit documents: Submit the form along with the FIR copy and indemnity bond to the post office.
- Fees: You will have to pay Rs 5 for the duplicate certificate.
Buyers of National Savings Certificate have to name a nominee, in the event of the demise of the NSC holders before the end of the five-year tenure of the certificates. The nominees can have the option of encashing the certificates with an application to the postmaster and producing a death certificate.
Using NSC as collateral for loans
National Savings Certificates can be used as collateral for loans. In order to get the loan, the certificates have to be transferred to the bank or lending institution.