National Savings Certificate:National Savings Certificate (NSC) is a government scheme with guaranteed returns. This is a fixed income investment option, which attracts investors who do not want to take any market risk. This 5-year government scheme can be started in post offices across the country, in which an account can be opened with a minimum of Rs 1000. There is no limit for maximum deposit. However, if we also keep inflation in mind, the amount received on maturity seems to beat inflation with great difficulty. At the same time, tax is also levied on interest income.
How much interest is being received (Interest Rate in NSC)
According to India Post, the annual compounding interest of 7.7 percent is available on the 5-year National Savings Certificate Scheme. In this scheme, interest is compounded annually and is payable on maturity. You cannot renew this scheme on maturity after 5 years. To continue investing in NSC after maturity, you will have to purchase a new NSC certificate with the applicable interest rate.
Retirement: Rs 1 crore will be in your pocket along with provision of pension of Rs 1.25 lakh, saving Rs 250 per day in NPS will help.
What is the value of certificates?
Certificates worth Rs 100, 500, 1000, 5000, 10,000 or more are available in NSC. There is no limit to invest in this. That means you can buy any number of certificates.
NSC: What is the profit on investment of Rs 10 lakh in 5 years?
Deposit: Rs 10 lakh
Interest rate: 7.7 percent compounded annually
Tenure: 5 years
Amount on maturity: Rs 14,49,034
Interest benefit: Rs 4,49,034
Interest income is not tax free (Tax Rules in NSC)
Investing in National Savings Certificate provides tax exemption under Section 80C of the Income Tax Act. However, this rebate is available only on investments up to Rs 1.50 lakh. The interest received from NSC for the first 4 years is reinvested, hence tax exemption is given.
But after completion of 5 years of NSC, it cannot be reinvested, hence the interest income is taxed as per the tax slab rate. TDS is not deducted on interest amount.
Power of Compounding: Every year’s delay in investment reduces the power of compounding, there will be a difference of lakhs in returns.
Do these things while filing returns
The investment made in NSC gets the principal amount along with interest after 5 years. CBDT rules say that it is necessary to show the interest income of NSC in every year’s ITR. Therefore, keep this in mind while filing tax returns. Suppose you have invested Rs 1 lakh in NSC and are getting interest at the rate of 7.7 per cent, then it will be necessary to show the income of Rs 7700 in ITR every year.