National Savings Certificate
Investing in National Savings Certificate (NSC) entails making a lump sum investment for a 6-Yr period. While the minimum investment amount is Rs 100, there is no upper limit. Presently, investments in NSC earn a return of 8.0 per cent pa, compounded on a half-yearly basis.
In other words, Rs 100 invested will grow to approximately Rs 160 on maturity. Unlike PPF, the rate of return in NSC is locked in while investing; as a result, the investments are indifferent to any subsequent change in rates.
Liquidity
NSC scores poorly on the liquidity front. Interest income is received on maturity. Also, premature withdrawals are permitted only in specific circumstances like death of the holder, forfeiture by the pledgee or under court’s order.
Taxation
Investments of upto Rs 100,000 pa are eligible for tax benefits under Section 80C. Furthermore, the interest accruing annually is deemed to be reinvested, hence it qualifies for deduction under Section 80C. However, the interest income is chargeable to tax.
Apt for...
Given its nature (lump sum investments), NSC is best suited for gainfully investing one-time surpluses and to provide for needs that will arise over a corresponding (6-yr) timeframe. It will be apt for investors seeking returns over liquidity.
Small Savings Schemes: An overview
Image: A woman deposits her money into a piggy-bank | Photograph: Chung Sung-Jun/Getty Images
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