National Savings Certificate (NSC)

National Savings Certificate(NSC) is available in every Post Office. Amount you deposit in this scheme is tax Exempted. This scheme is governed by the Central Govt. of  India.

• Advantages
• Deposited amount is exempted form Income Tax under Section 80C
• Lock in period will be 5 Years, Comparatively less than PPF
• Interest rate is more than Bank Fixed Deposit
• No Risk Involved
• For the 2016-2017 financial Year Interest rate is 8.1% per Annum
• You can avail loan by submitting these certificates at any Bank
• Only last year earned Interest is Taxable
• Whatever the Interest you earn in first 4 years will be reinvested in NSC, So you can show this as Investment for the particular year
• For Example
• Let us consider you have Invested Rs.20000/- in NSC with interest rate of 8.1%
• After completion of first year, you will get Rs.1620/- as interest for the first year which will be compounded to initial investment
• So now in Income tax returns, you have to show this Rs. 1620/- as Other sources of Income and also you can declare that Rs.1620/- is reinvested in NSC and you can claim Tax benefit 
• After Completion of 2nd year, you will get 8.1% of Rs.21620/- i.e.Rs.1751/- as Interest which will be compounded to the previous balance
• So in income tax returns of the particular year, you have to show this Rs. 1751/- as other sources of incom and declare that Rs.1751/- is invested in NSC
• So only the Interest earned in the last year is paidout and not invested in NSC, is taxable
• Other schemes consider only the initial investment for tax exemption, This is main advantage compared to Bank fixed deposit
• Disadvantages
• Interest earned is taxable
• Not liquid until maturity
• Less returns compered to Mutual Funds
• Notes
• Always consider NSC compared to Bank fixed deposit
• Under 80C section you can show upto 1.5L per year