Investment in NSC

Why in NSC?

One of my friends asked me why I invest in NSC (national saving certificate). Although he knows that investment in NSC is safe, tax saving u/s 80C, interest received on it is exempt, he tired to validate his part by giving example of PPF, PPF is safe, provide tax saving u/s80 its interest also exempt from tax and the best part of PPF is that it cannot be attached or forfeiture on order of court of law. After hearing his point of view I started narrating the benefits of NSC, here I am not comparing the two but only writing why we should invest in NSC.

Type of NSC  

NSC’s are two types 5year and 10 year both carry different rate of interest. The 5 year NSC carries 8.60% and for 10 year NSC carries 8.90% rate of interest these were applicable w.e.f. April 1^st 2012 but it has been changed and the changed rate are applicable w.e.f. April 1^st 2013 which are 8.5% and 8.8% respectively. These two are known as NSC VIIIth issue and IXth issue respectively.

1.       NSC specifically designed for the salaried and business class who are Income Tax assessee to provide some tax relief to them.

2.       No Maximum limit for investment

3.       Certificate can be used as security for loan.

4.       As we all are aware that maximum of Rs. 1, 00,000P.A. qualifies for IT rebate U/S 80C of Income Tax Act.

5.       Certificate can also be purchased by a major on behalf of minor or also by minor itself

6.       Available in denominations of minimum of 100/-, 500/-, 1000/-, 5000/- and maximum of 10,000/-

7.       Compounding of interest is done on half yearly and cumulative interest received on maturity.

Advise

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.

And the best part is that on maturity of these certificates you can redeem these from any post office in India, for that you just need to inform the 1 month before the maturity date to  post office of your area once they will confirm the certificate's status they will redeem. 

For example

 If today Mr. A is 30 year old person who wants to plan his retirement in the age of 50 years.

We advised him to invest in NSC every month, say he has spare amount of 5,000 every month after discharging all his duties, liabilities etc.

SO if he Invest 5000 per month in April 13,May 13, June 13………..and so on up to Dec 13 and same practise followed for the next year and then next up 5 year till the time his first purchased NSC comes to maturity.

Invested Rs. 5000/-in April 13 ----------------NSC will mature in 5^th year from now and receive 7,581INR. Now reinvest it again for 5 years same practise will follow and so on.

Amount invested in next 5^th year will provide maturity some from next 5^th year to next to next  5^th  year it becomes 11 372 INR and so on.

  

SO you can imagine what amount he will get every month from the NSC.

 

Note:

Assuming that same rate of interest will receive by investor.