Saving is an important component of your financial planning. However, investing it to grow and multiply is also another essential component that should not be ignored. Investments are very convenient these days as we have a lot of options, such as, Savings Plan. A lot of life insurance companies offer life insurance cum savings plan that you can invest in. There are other available options for investment according to a particular financial goal. National Saving Certificate is a post office savings product with low-risk investment and numerous benefits.
Let's explore the National Saving Certificate in detail in this article.
What is National Saving Certificate?
National Saving Certificate or NSC is a popular fixed-income securities aimed towards promoting savings and investment among the people of the country. The Government of India fosters these saving schemes through Post Offices. It is a secure and low-risk product suitable for small and medium-income investors to save tax while earning returns.
The post office delivers two types of NSC or issues two methods for an individual investment.
1. NSC Issue VIII
NSC Issue VIII with a maturity period of 5 years. The interest rate offered by this category of NSC is slightly lower than the interest rate given by NSC IX. NSC Issue VIII comes with a denomination of ₹100 to ₹10,000.
NSC Issue VIII intends to provide an investment option for those who want to invest in safe instruments while simultaneously availing tax benefits. The investor can start with a small investment and increase the amount steadily.
2. NSC Issue IX
NSC Issue IX comes with a distinguishing feature of a 10 years maturity period. The interest rate offered by NSC Issue IX is slightly higher than the interest rates offered by NSC VIII.
NSC Issue IX also offers a denomination ranging from ₹100 to ₹10,000.
Three Types of Holdings in NSC
1. Single Holder Type Certificate
This type of certificate can be held only by a single person. Only individuals can issue such type certificates, and joint holders are prohibited.
Nominees can be appointed, but all the decisions are made by the individual on whose name the certificate has been issued. Certificates are allowed to be issued to an adult only. Nominees can also be chosen in a life insurance policy. When the policyholder passes away, the death benefits are given to the nominees, otherwise known as beneficiaries.
Know all about nominee in a life insurance plan.
2. Joint 'A' Type Certificate
Certificates that are issued to 2 adults are categorized under Joint 'A' Type certificate. After maturity, the amount is received by both the joint certificate holders.
In case of any legal changes such as the transfer or cancellation of the certificate, or a change of nominee, the signature of both the holders is required. It must be a mutual decision.
3. Joint 'B' Type Certificate
In this kind of certificate, the Joint B type pays the maturity value to any two joint certificate holders. It is the main distinctive difference. This is contrary to maturity payment to both the certificate holders in joint A type holding, as mentioned above.
Apart from this, all the other features remain the same in A and B type joint certificates. Both the types can be operated and held by two adult joint certificate holders.
How does a National Saving Certificate Work?
NSC is a very simple working investment scheme. The interested investor has to reach out to the nearest post office and deposit the desired amount of money to be invested. This deposited amount is considered an investment in NSC. The investor can invest any amount according to their convenience.
The investor is qualified for an annual interest. NSC usually has a maturity period of 5-10 years starting from the date of allotment. It must be noted that the interest shall be paid to the investor after the date of maturity. The interest received until the maturity date is unauthorized and shall be reinvested. The NSC interest rate is 6.8%. It concludes that NSC offers almost better interest rates when compared to other fixed-income investment options such as PPF, Tax saving Fixed Deposits.
Who is Eligible for NSC?
NSC is an encouraging saving or investment scheme by the government of India. It is mainly focused on individuals; hence, Hindu Undivided Family (HUFs), trusts cannot invest in NSC, and Non-Resident Indians cannot invest in NSC.
In a specific case, if a person was a resident of India at the time of applying or investing in the NSC, but later the investor subsequently became an NRI during or before the maturity period.
As per the provisions allowed in this scheme, the investor will be enabled to claim the interest and tax benefits gained from investing in a National Saving Certificate. Indian individuals who aspire to invest in fixed income investment with tax benefits may invest in NSC.
NSC Withdrawal Rules
NSC offers a predetermined lock-in period which makes it a distinct feature. It implies that any investment in NSC is not allowed to be withdrawn before the maturity date.
Though an investor in a savings certificate can withdraw his invested amount before the maturity period, only in the following specified circumstances
- Due to the death of the holder of the certificate or the holder or joint holders
- On the order of the court.
- By the forfeiture by a pledgee. The required pledgee must be an authorized Gazetted Government officer.
Encashment is done only at face value if a premature withdrawal is made within one year from the date of issue of the certificate. No interest is provided to the investor before a period of 1 year.
National Saving Certificate overall stands as a decent savings scheme offered by the Indian government for individuals. NSC is made simple by the post office and works modestly. It provides many benefits to the investor with a variety of categories and a satisfactory interest rate.
Guaranteed Income4Life Plan by Canara HSBC Oriental Bank of Commerce Life Insurance as a Saving and Investment Plan
If you do not fit into the eligibility criteria of investing in a National Saving Certificate, you can explore various saving plans by Canara HSBC Oriental Bank of Commerce Life Insurance that offers incredible features. Guaranteed Income4Life Plan offers a guaranteed regular income to take care of your post-retirement expenses.
Here are some benefits of Guaranteed Income4Life Plan:
1. Provides income for short to medium term, long-term of 15 or 20 years, or up to 99 years of age – depending on the plan option you choose.
2. Limited premium pay option enables you to pay premium for a limited period of time while you get covered for the entire term.
3. You will get enhanced regular income for paying higher premiums.
Learn more about Guaranteed Income4Life Plan.
There are various saving and investment plans that you can invest in. However, to buy the best savings plan, you must explore all the available options. Not all the saving plans are meant for every individual. It will vary as per your needs, financial goals, and affordability.