Benefits of NSC
National Savings Certificate or NSC is a certificate accessible at most post offices in India. The NSC is basically a scheme designed especially for government workers and other business people. It is a guaranteed return scheme and it provides various benefits. Further down are examples of benefits of NSC.
1. Tax benefits
People who invest in NSC receive significant tax benefits of whatever amounts they invested. The interest accumulated for a certain year is considered as a fresh investment in that year. In fact, the NSC is an ideal instrument for individuals who want to invest in order to save on tax. NSC is also useful for those who desire to accumulate tax benefits over a long period of time and are also not too concerned about liquidity.
2. Higher returns
NSC attracts an 8% interest rate per year compounded twice every year. Due to this compounding, the interest rate comes to approximately 8.16%. In addition, NSCs are usually under cumulative schemes with the whole interest earned every year being reinvested. Once the certificate has matured, the interest earned is paid together with the initial principal amount. For instance, if an individual puts in RS 10,000 in the NSC scheme, he or she is going to get approximately RS 16,010 only after six years.
3. Easy to transfer
The certificates in this NSC scheme can be transferred easily from one individual to another by using the post office. A nominal charge is typically required so as to register the transfer. It is also possible to transfer certificates between different post offices.
4. Accessible by anyone
Any adult can purchase NSC for themselves or for a minor. Two people can also jointly purchase the certificate. Nowadays, most trusts are purchasing these certificates.
A key demerit of NSC is that it lacks liquidity and thus the investment stays fixed for six years.