If you are one of those investors who are looking for guaranteed returns on investment and also want security of investment, then Post Office’s National Savings Certificate i.e. NSC is a better option in such investment scheme. This scheme is an investment scheme run by the Government of India. A special advantage of investing in this is that under Section 80C of Income Tax, you can also save tax on your investment. In this, the return on investment has nothing to do with market fluctuations.
Interest rates and tax exemption
At present, interest on National Savings Certificate is available at the rate of 7.7% per annum. In this, interest is calculated on annual basis, but it is paid only at the time of maturity (on completion of 5 years). The interest rate fixed at the time of investment remains constant for the entire period (5 years). The annual interest received on NSE is considered re-invested, hence except the last year, it is also tax free under 80C.
You will get fixed return of ₹1,16,062 on deposit of ₹2,50,000.
According to angelone, returns on National Savings Certificate (NSC) are calculated using the compounding interest formula. The formula for calculation is-
Maturity amount = P × (1 + r/n)nt
Where,
P is the original amount of investment
R is the interest rate or compounding rate
T is the investment period
N represents the frequency of compounding.
In such a situation, when you deposit ₹ 2,50,000 in lump sum at the interest rate of 7.7% per annum, then in five years (maturity period) you get a total fixed return of ₹ 1,16,062 on this amount. That means after five years you have a total fund of ₹ 3,66,062.
Who can invest
All Indians can invest in the National Savings Certificate Scheme. Non-resident Indians i.e. NRIs cannot invest in NSC. However, if a resident investor becomes an NRI in future, he can hold the certificate till its maturity. Adults as individuals can invest in their own names or as guardians of minors/mentally unsound persons. Minors above 10 years of age can also invest in it. Keep in mind, Trusts and Hindu Undivided Families i.e. HUF cannot invest in this scheme. However, HUF creators can invest in the National Savings Certificate Scheme in their own names.
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