National Savings Certificate (NSC) is a government-backed savings scheme that offers guaranteed returns. The popular scheme, launched in May 1989, is suitable for conservative small investors who are averse to taking much risk when it comes to investing.
NSC account can be opened with a minimum deposit of Rs 1,000 at any post office in the country. The tenure of this scheme is 5 years. The savings scheme, which gets reviewed every quarter for a rate revision, is at present offering an interest of 7.7% per annum. NSC depositors also get tax benefits, as the savings instrument comes under Section 80C of Income Tax Act.
There is no maximum limit set for investment in the NSC scheme, but the tax benefit is available on only up to Rs 1.5 lakh of investment under the old tax regime. However, the interest earned from NSC is taxed under the head “Income from Other Sources”. Overall, NSC investment comes with the dual advantage of investing and tax saving.
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According to India Post, the NSC offers a 7.7% annual compound interest rate for a 5-year tenure. Interest is compounded annually but paid out only at maturity. After the scheme matures, it cannot be renewed automatically. To continue investing after completing 5 years, the subscriber needs to buy a new NSC certificate at the prevailing interest rate.
Available denominations:
NSC certificates are available in denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000, Rs 10,000, or more. There is no limit on how many certificates you can purchase. In this write-up, we will see from a calculation how much corpus one can build in 5 years, assuming a one-time investment of Rs 15 lakh.
NSC returns on Rs 15 lakh investment over 5 years:
One-time deposit: Rs 15 lakh
Interest rate: 7.7% compounded annually
Tenure: 5 years
Maturity amount: Rs 21,73,551
Interest earned: Rs 6,73,551
So, here we saw how a one-time investment of Rs 15 lakh became Rs 21.73 lakh in five years of investment in the NSC plan.
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