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Monday, November 11, 2013

National Savings Certificates - A Better Saving Option - With Tax Exemption (under 80C)


National Savings Certificates (NSC)
National Savings Certificates are savings bond issued by government of india and can be bought from post office counters.


There are Two NSC Options available
  • NSC VIII Issue (5 Years Lock - In Period)  and
  • NSC IX Issue (10 Years Lock -In Period)

NSC VIII Issue
  • Scheme specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses.
  • No maximum limit for investment.
  • No Tax deduction at source.
  • Certificates can be kept as collateral security to get loan from banks.
  • Investment up to INR 1,00,000/- per annum qualifies for IT Rebate under section 80C of Income Tax Act.
  • Trust and HUF cannot invest.
  • Rate of interest 8.50%.
  • Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 151.62 after 5 years.
NSC IX Issue
  • No maximum limit for investment.
  • INR. 100/- grows to INR 234.35 after 10 years.
  • Minimum INR. 100/- No maximum limit available in denominations of INR. 100/-, 500/-, 1000/-, 5000/- & INR. 10,000/-.
  • A single holder type certificate can be purchased by an adult for himself or on behalf of a minor or to a minor.
  • Rate of interest 8.80%.
  • Maturity value of a certificate of INR.100/- purchased on or after 1.4.2012 shall be INR. 236.60 after 10 years.
Buy National Savings Certificates (NSCs) every month for Five years – Re-invest on maturity and relax - On retirement it will fetch you monthly pension as the NSC matures.

Return 
It is having a high interest rate at 8.6 % compounded half yearly. Post maturity interest will be paid for a maximum period of 24 months at the rate applicable to individual savings account. A Rs1000 denomination certificate will increase to Rs. 1524 on completion of 5 years.

Advantages

The investment under this scheme qualify for the benefit of Section 80C of the Income Tax Act, 1961 from 1-4-2007. Interest accrued for any year can be treated as fresh investment in NSC for that year and tax benefits can be claimed under section 88. NSCs can be transferred from one person to another through the post office on the payment of a prescribed fee. They can also be transferred from one post office to another. The scheme has the backing of the Government of India so there are no risks associated with your investment.

How to start?
Any individual or on behalf of minors and trust can purchase a NSC by applying to the Post Office through a representative or an agent. Payments can be made in cash, cheque or DD or by raising a debit in the savings account held by the purchaser in the Post Office. The issue of certificate will be subject to the realization of the cheque, pay order, DD. The date of the certificate will be the date of realization or encashment of the cheque. If a certificate is lost, destroyed, stolen or mutilated, a duplicate can be issued by the post-office on payment of the prescribed fee.

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