Investing in the National Savings Certificate

The National Savings Certificate (NSC) is a popular and safe small-savings instrument that combines tax savings with guaranteed returns. This scheme is backed by the government and is available at post offices. The distribution reach of India Post is responsible for the popularity of this instrument. The main objective of investing in the NSC is to avail tax deduction on deposits and guaranteed returns on investment. Capital and Inflation Protection When investing in the NSC, your capital is completely protected as the scheme is backed by the Government of India. The NSC is however not inflation protected. This means that whenever inflation is above the current guaranteed interest rate, the deposit earns no real returns. However, when the inflation rate is below the guaranteed interest rate, it does manage a positive real rate of return. Guarantees The interest rate on the NSC is guaranteed. Currently, the interest rate is 6.8 per cent on the five-year option, compounded annually. The ten-year option of the NSC has been discontinued. Ever since FY 2016-17, the interest rate on the NSC is revised

This article was originally published on August 24, 2021.