National Savings Certificate

If you are a risk-averse investor, there are various government-backed initiatives that you can choose for safe and stable profit generation. National Savings Certificate (NSC) is an investment vehicle that you can consider in this regard. Continue reading this blog to find out more.

What is a National Savings Certificate?

National Savings Certificate (NSC) is a low-risk government-backed investment scheme. It provides a stable income with a fixed rate of interest that is compounded annually. All the interest earned over the investment horizon is reinvested into the scheme, and the holder gets a lumpsum amount when the certificate matures.

Interest Rate7.72% p.a
Minimum Investment₹1,000/-
Lock-in Period5 years
Tax SavingUp to 1.5 Lakh under Section 80C

Types of National Savings Certificates

National Savings Certificates can be classified into three categories depending on their holding mode. They are as follows:

1. Single Holder Type Certificate

This type of NSC is issued to a single individual. That person can appoint a nominee for their asset, and even a minor can opt for this certificate via a legal guardian.

2. Joint ‘A’ Type Certificate

As the name suggests, a Joint ‘A’ Type certificate can be held by joint holders. Decision-making powers regarding this asset, like adding, cancelling and transferring a nominee, lie with both individuals and upon maturity, the amount payable goes to both of them.

3. Joint ‘B’ Type Certificate

The Joint ‘B’ Type certificate has all the same aspects as a Joint ‘A’ Type certificate except that its maturity amount is payable to only one of the holders.

Features of National Savings Certificate

The features of NSC are as follows:

1. A Fixed Source of Income

National Savings Certificates have a fixed interest rate. It is guaranteed and backed by the government and gets compounded annually. Thus, by investing in this scheme, you can get a fixed source of income.  

2. Flexible Investment Amount

The minimum amount you need to invest to hold an NSC is ₹1,000. After that, you can keep adding money in multiples of ₹100 as per your choice. This feature makes National Savings Certificates a flexible investment vehicle.

3. Premature Withdrawal

Usually, before the 5-year lock-in period, you are not allowed to withdraw from your NSC earnings. However, under certain circumstances, like the death of the certificate holder, a court order to prematurely withdraw the investment is permissible. If you withdraw prematurely from the scheme within 1 year, you will only receive the initially invested amount. For withdrawals after 1 to 3 years, you will receive your initial investment and the simple interest compounded annually.

Furthermore, if the beneficiary for your investment is a girl child, you can withdraw a partial amount to fund her higher education or marriage. However, this sum must be at most 50% of the total investment. 

4. Collateral for Loans

You can use your NSC investments as collateral for borrowing credit. This facility is available with banks and Non-Banking Financial Companies (NBFCs). 

5. Transferable

National Savings Certificates allow you to transfer your investment from one post office to another. Moreover, you also transfer your certificate to another holder. 

6. Provision to Add Nominees

As an NSC holder, you can add nominees to your assets. You can add only one nominee unless the certificate denomination is ₹500 or greater. If the person you nominate is a minor, you must mention their legal guardian’s name to the post office or Bank. 

Furthermore, nomination facilities are unavailable if the holder is a minor.

Eligibility Criteria for Purchasing National Savings Certificate

Here are the NSC eligibility criteria that you must meet to invest:

Nationality Indian
Age LimitNo age limit (for minors aged above 10, their parents or legal guardians can make investments on their behalf)
Note – Non-Resident Indians (NRIs), Hindu Undivided Families (HUF), Public and Private Limited organisations and Trusts cannot make NSC investments.

Documents Required for NSC

This is the list of NSC documents you need to provide for investing:

  • National Savings Certificate application form
  • Voter ID card, Aadhaar card, PAN card, driving license for identity proof
  • Telephone bill, Passport, electricity bill, bank statements as address proof
  • A recent photograph

How To Invest in a National Savings Certificate?

You can purchase National Savings Certificates in three ways, which have been discussed below:

1. Online

Here are the steps that you can follow to buy NSC online:

  • Step 1: First, you must open a savings account at a National Bank or post office. The bank can be any public sector bank, and in the case of private banks, you can only go for Axis, HDFC and ICICI. Your savings account must be in one of these banks, as the government has given them the authority to accept NSC deposits. 
  • Step 2: You need to activate the Net Banking Services for your account. 
  • Step 3: Hereafter, you can access the net banking portal in order to purchase the National Savings Certificate in e-mode.    

2. Passbook Mode 

You can buy NSC in passbook mode in case you do not have net banking services enabled in your account:

  • Step 1: First, you must have a savings account at any public sector bank, private bank (HDFC, Axis or ICICI) or post office.
  • Step 2: Buy the NSC via a bank, and they will issue an NSC passbook, where you can view all the transactions relating to your investment.   
  • Step 3: Get the passbook stamped and signed by an authorised official. In addition, if you have a National Savings Certificate passbook mode, you can convert it to an e-format.

To do this, you can visit the post office or bank from where you bought the certificate, provide all the necessary details and collect the e-certificate. The authorities will then destroy the previously issued passbook.

How to Redeem National Savings Certificate?

The steps to redeem an e-National Savings Certificate are as follows:

  • Step 1: Log in to the Internet banking account you initially used to buy the NSC.  
  • Step 2: Raise a request for redemption. You will receive the maturity amount in your linked savings account. Now, if you have an NSC passbook, you can follow the steps given below for redemption:
  • Step 3: Go to the post office or bank branch from where you purchased the certificate.
  • Step 4: Take a redemption request form, fill in all the necessary information and attach the required documents.
  • Step 5: Submit the form. Your request will be processed, and the money will be credited to your bank account.

How to Add a Nominee for Your National Savings Certificate?

You can add a nominee to your National Savings Certificate at the time of purchase. However, if you did not appoint one then you can easily do it later by following a few steps. They are as follows:

  • Step 1: Collect Form 2 (for adding a nominee) or Form 3 (for changing a nominee) from the post office or bank where you bought the certificate. 
  • Step 2: Provide all the nominee details to the P.O. or bank authorities.

Additionally, there are two things you need to remember in this regard:

  • You cannot nominate anyone if you are buying NSC on behalf of a minor.
  • If you do not have a nominee, the maturity amount will go to your legal heir in case of your unfortunate demise during the investment tenure.

How to Transfer a National Savings Certificate?

You can transfer your National Savings Certificate to another bank or post office when you relocate to a new location. To do so, follow the steps given below:

  • Step 1: Visit your bank/post office and ask for Form NC-32. 
  • Step 2: Fill in all the account holder, certificate and nominee details.
  • Step 3: Submit the application.

Note – You can complete this process at the bank/post office, both in your old or new location. 

Now, if you wish to transfer the ownership of your National Savings Certificate to another individual, you can follow these steps:

  • Step 1: You and the person to whom you are transferring the ownership will have to apply for the transfer process by filling out Form NC-34 Annexure 2.
  • Step 2: After the application, an authorised post office/bank official will investigate. If they do not find any issues, the ownership will be transferred to the new owner.

After the process is complete, the bank/post office will revoke your access if you have an e-NSC. If your certificate was in passbook mode, you must submit it to the concerned authorities. They will remove your details and replace them with the new owner’s.

However, before this transfer process can take place, there are certain things that you need to keep in mind:

  1. You need written consent from the issuing post office’s Postmaster to transfer an NSC.   
  2. Transfer is only possible under the following circumstances:
  3. In case the certificate holder dies. Under such circumstances, the nominee will become the new holder. 
  4. When the court orders the asset’s transfer to another individual. 
  5. For joint holdings, ownership is transferrable from one owner to the other. 
  6. You can get legal sanction to transfer ownership only after 1 year from the certificate issuing date. 
  7. If you hold the certificate jointly with another individual, signatures of both are necessary for transferring ownership. 
  8. In case you are holding a National Savings Certificate on behalf of a minor, you have to provide evidence that the child is alive and well, and this is being done keeping their best interests in mind.

Tax Benefits of National Savings Certificate

Here are the applicable NSC tax benefits that you can avail by investing in this scheme:

  • No Tax is Deducted at Source (TDS) for the interest earned in NSCs.
  • As per Section 80C of the Income Tax Act, you can gain a maximum tax benefit of ₹1.5 lakhs on your investment. 

Note – The interest you earn in the first four years is reinvested into the principal amount. Thus, they are applicable for deductions under Section 80C. However, in the fifth year, you receive the maturity amount and the fifth year’s interest, which has tax implications.

Charges Associated with National Savings Certificate

There is a charge of ₹5 that is payable under the following circumstances:

  • Appointment of a nominee after purchasing the certificate
  • Transfer of ownership 
  • Issuing a duplicate certificate
  • Changing the certificate’s denomination
  • Encashing the NSC and collecting the Certificate of Discharge from the post office

Disadvantages of Investing in National Savings Certificate

Some of the disadvantages of investing in National Savings Certificates are as follows:

  • The rate of interest is fixed and does not have any inflation adjustment. 
  • There is no option to reinvest your maturity corpus. You need to purchase a new certificate to reinvest in this scheme. 
  • The online application method for NSC may not be available at all post offices and banks.


Overall, NSCs are excellent options for low-risk investors. They are easy to invest in, as one can simply visit a post office or a bank to get started. Moreover, as they provide stable returns during the investment horizon, these financial assets can be suitable for individuals who are new to investing.


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