National Savings Certificates: Should You Invest in it?

National Savings Certificates is an Indian Government’s small savings scheme. The scheme was launched on 8th May 1989. Here in this article, we will discuss all the key points’ e.g.

How to invest in national savings certificates?
What are the benefits of investing in this scheme?
What are the current interest rates applicable in this scheme?
Can this scheme help us in saving taxes?
Should we invest in this scheme for the long term growth of our capital?
And many other such queries which you may have in your mind will be resolved in this article. So let us start with.

National Savings Certificates

1. What are the denominations in which the certificate is issued?

The certificate is issued in the denominations of 100, 500, 1000, 5000 and 10000 rupees.

2. How many types of certificates are available?

Like the Kisan Vikas Patra certificate, the national savings certificates are available in 3 types: Single holder type certificate, joint ‘A’ type certificate, and joint ‘B’ type certificate.

3. How to buy the national savings certificates?

The national savings certificate can be purchased at a post office or authorized banks. The purchaser has to fill Form 1 and submit it to the post office or bank along with following types of legal tenders.
1. Cash: If the certificate is purchased by the cash payment, the certificate would be issued immediately.
2. Locally issued cheques, pay orders or demand drafts: In such case, the date of issue of the certificate would be the date on which the payment is received from those cheques, pay orders or demand drafts.
3. By submitting a withdrawal form along with passbook from post office savings bank account.
4. Electronic transfer, if it is available.
5. By surrendering matured certificates.
If for any reasons, the certificate is not issued, a provisional receipt would be made available to the purchaser which can be exchanged for the certificate later. In this case, the issue date of the certificate would be the date of the provisional receipt.

4. Can an NRI buy the national savings certificate?

An NRI is not allowed to buy a certificate. However, if he buys the NSCs and later he becomes an NRI, the certificate would be continued and encashed on the maturity on the non-repatriation basis.

5. Can we transfer national saving certificates from one post office to another post office?

Yes, you can transfer your certificates from one post office to another without any charges.

6. Can national savings certificates be transferred from one person to another person?

Yes, a certificate issued under national savings certificate (VIII Issue) is transferable from one person to another under these conditions.

7. What are the nomination rules in NSC certificates?

Following rules are applicable for nomination in national savings certificates:
The holder/holders can nominate any person in the certificate at the time of purchasing the certificate. The application for nomination should be made in the Form-1.
If the nomination is not done at the time of purchase of the certificate, the nomination can be done through Form 2 before the maturity of the certificate. There is no fee applicable for the first nomination. Following rules also relates to the nomination in the certificate.
1. If the denomination of the certificate is less than 500 rupees, you can only nominate one person.
2. If the certificate is issued to a minor or a representative for minor, in such case no nomination is allowed.
3. You can also cancel or change the nomination in the certificate. A fee of 5 rupees is applicable for such nominations and cancellation. Form 3 is used for such transactions.

8. Where can we get the Forms for operating in the certificate?

You can get forms for national savings certificates from the post office or registered banks. You can also obtain the forms from the website of National Savings Institute.

9. What is the maturity period of the certificate?

For a certificate which is purchased on or after 1st April 2013: A certificate of any denominations matures after five years from the date of issue of the certificate.

So, you get 151.62 rupees for a 100 rupees denomination certificate after maturity. The rate of interest which compounds half yearly on the certificate is declared in every quarter.

10. What is the post-maturity interest rate?

If the certificate is matured and the amount is due for payment; such due amount will earn simple interest as applicable on savings accounts. The due amount along with the interest will be paid to the purchaser in a lump sum.

11. What are the rules for premature encashment of the certificates?

The premature encashment of the certificate is allowed in the following conditions:
1. Death of the holder/holders
2. forfeiture by a pledge
3. By order of a court of law

In all the above conditions if the certificate is cashed out within a year of the certificate issue date; only the face value of the certificate will be paid.

However, if a certificate is cashed out after one year but before three years of the certificate issue date; the face value of the certificate along with the simple interest on the face value of the certificate will be paid.

The simple interest calculated will be same as on applicable interest rate on the on post office savings account.

12. What if I lost my NSC certificates?

You can apply for a duplicate certificate to the post office from where you purchased the certificate. You can also apply for a duplicate certificate at any other post office; in that case, the application will be forwarded to the post office from where you bought your certificate.
The application for a duplicate certificate must be accompanied by the number of the certificate, date of issue, amount and reasons for loss of the certificate.
If the attending officer is satisfied with the reasons of loss of the certificate; a duplicate certificate will be issued to the applicant after collecting indemnity bond, approved securities or a bank guarantee.
No sureties or bank guarantee is required if the lost certificate’s denomination is less than 500 rupees.

13. What are the rules for issuing a duplicate certificate in case the original certificate is defaced or mutilated?

If your certificate is defaced or mutilated in such case you can apply for a duplicate certificate without the need of indemnity bond, sureties or bank guarantee. You need to surrender your original defaced or mutilated certificate to the post office.

14. How can I get corrected mistakes in my certificate?

If your certificate has some clerical mistakes, you can apply for the correction in your certificate.

15. Can I save taxes if I invest in these certificates?

Yes, deposits in NSC along with interest accrued qualify for deduction under section 80C of income tax. The total discharge value is also exempted from any tax liability.

16. Can I convert my lower denominations certificates for higher denominations certificates?

Yes, you can convert your low denomination certificates to higher denomination certificates or vice versa. There are no charges for such a facility. Also, the conversion would not affect the issue date of your original certificates.

17. Is the loan facility available in NSCs?

Yes, you can apply for a loan pledging your certificates.

18. Should I buy these certificates for my long term financial goals?

If you have just started earning then I don’t recommend investing in these certificates. They don't provide you inflation-beating returns for the long term. If you’re a retired person or above 50 years of age then you can buy these certificates. This scheme is not going to land you to financial independence.

Have you invested in national savings certificates? What is your experience and how do you like this scheme? Please share your thoughts in comments.

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