When it comes to risk-free investments that yield returns and enhance wealth, options like Fixed Deposits (FD) and the National Savings Certificate (NSC) are among the top contenders. The latter, though, is standing out currently due to its higher interest rate of 7.7%, which trumps most banks’ offering, including SBI’s 6.5% and ICICI Bank’s 7% for a five-year term.
National Savings Certificate: A Secure Investment Option
The NSC, a government-backed fixed-income investment option, allows investors to start with a minimum investment of 1,000 rupees and thereafter, in multiples of 100 rupees. However, to invest in NSC, an investor would need to visit the post office. One of the added benefits is that the accumulated interest, which compounds on a yearly basis, will be remitted upon the term’s completion. Additionally, under the provisions of Section 80C of the Income Tax Act, 1961, investors have the option to avail tax benefits up to 1.5 lakh rupees on the capital invested.
NSC: The Ins And Outs
While the NSC has a lock-in period of five years, it is non-renewable once the term expires. To maintain the investment, a new initiation will be required at the prevailing interest rate. Furthermore, the interest rate offered at the time of purchasing the certificate remains unchanged throughout its tenure. However, a flip side to this investment is its sensitivity to changes in interest rates. An inability to withdraw the investment prematurely during a hike in interest rates and reduced returns in times of high inflation are some downsides to consider.
How Much Can You Earn After Five Years?
Let’s break down the potential returns. If an investor deposits 1 lakh rupees in NSC, they could receive a total of 1,44,903 rupees at the end of five years. In another scenario, if an investor puts in 10 lakh rupees, with a 7.7% interest rate, the maturity amount could be a whopping 14,49,034 rupees. This signifies a hefty profit of 4,49,034 rupees just from interest.
In a nutshell, the National Savings Certificate could be an optimal investment choice for individuals seeking better returns than Fixed Deposits along with risk-free capital protection. Its additional tax benefits also make it a standout amongst various other small savings schemes. So, why wait? Make your money work harder for you today!
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