Why National Saving Certificate is a good option in the current situation

NSC: Except for Senior Citizen Saving Scheme, no 5-year investment option gives more than 6.8% returns with government guarantee.

NSC: The financial year is nearing the end and many people will be planning to invest in tax saving options. But this is a difficult situation for investors. On one hand, the stock market is at its highest level, making it risky to invest in tax-saving funds – Equity Linked Saving Scheme (ELSS). On the other hand, the tax saving bank Fixed Deposit is getting a lower rate of interest.

Investors are also on the lookout for alternatives that do not require long-term commitments due to the economic slowdown due to the Kovid-19 epidemic. Therefore, the trend towards insurance policy, public provident fund may be less. In such a situation, the National Savings Certificate (NSC) has emerged as the right option that caters to the needs of investors.

The capital security

economy will still take time to come out of the impact of the Kovid-19. This is not the right time to take credit risk. Since NSE India issues the post, there is a government guarantee in it. Your capital is fully protected. After 5 years, this amount will definitely come back to you.

High return

NSC gets 6.8 percent interest which is compounded annually and gets on maturity. S Sreedharan, founder of Wealth Ladder Direct, says, “Investors who do not want to take the risk can invest in NSC. Currently, the return on NSC is better than the tax saving fixed deposit of public and private banks. State-run banks are paying between 5.1 per cent and 5.4 per cent per annum on tax saving fixed deposits, while private banks have interest on tax saving FDs ranging from 5.5 per cent to 5.7 per cent. Small finance banks, where the risk is comparatively high, there is 6.5% to 7.25% interest on saving FD. ”

On the other hand, except for Senior Citizen Saving Scheme which gives an interest of 7.4% every quarter, no 5-year investment option is giving 6.8% as much as the government guarantee.

Loan on NSC

Other options of tax savings like NSC cannot be withdrawn before 5 years. However, investors can take a loan by pledging it with the bank or any other lender. Because it is a fixed income option and there is also government trust, therefore most banks and NBFCs lend to it. Tax and investment expert Balwant Jain says, “You cannot withdraw NSE before maturity but you can take a loan up to 85% of its value.”

Tax benefits:

Deduction is available under Section 80C of the Income Tax Act on investments up to Rs 1.5 lakh in a financial year. Because of this, the returns on it become more attractive. Also, by adding the interest received from the NSC to your income is taxed, but you can get a rebate on its interest under section 80C. According to Balwant Jain, “There is a rebate of Rs 1.5 lakh on your investment, along with other options under section 80C. There is an exemption under Section 80C on the interest received in the first 4 years.

NSC is an attractive investment option for investors who want peace and also want tax rebates along with good returns.