NSS - Types, Features, Benefits and Interest Rate Comparison

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What Is a National Savings Scheme?

The National savings scheme is a government-regulated savings scheme that is administered by the Ministry of Finance and managed by the Department of Post, India. The fundamental goal of such programmes is to encourage people to save and ultimately develop sizable savings. Furthermore, such schemes' return rates are periodically reviewed and are backed by the Government of India, making them secure investment options.

The national savings schemes are planned for each kind of investor. Each of these schemes has its own set of qualifying requirements as well as a variety of features and perks along with tax deductions.

Types Of National Savings Schemes

  • Post Office Saving Scheme – One of the popular and accessible savings schemes is a Post Office Saving Scheme. The minimum deposit and maximum balance that may be kept are both Rs.500. The current interest rate for this account is 4%1 per year. It may also be opened in the name of a minor above the age of ten.
  • National Savings Recurring Deposit Account – The National Savings Recurring Deposit Schemes' major goal is to provide small investors with a way to deposit modest sums of money on a monthly basis to assist them in fulfilling their future requirements. A National Savings Recurring Deposit Scheme account may be started for as little as Rs 100.
  • National Savings Time Deposit Account – Under the terms of Section 15 of the Government Savings Bank Act, 1873, the Central Government of India introduced the National Savings Time Deposit Scheme. The accounts under this plan are available in four different maturities. The interest rate on these accounts is much greater than that of a traditional savings account. The interest rate on these accounts varies by maturity and rises with it. They may invest as little as Rs 100 as a deposit with no upper limit and should maintain a minimum of ₹1000 in the account at all times.
  • National Savings (Monthly Income Account) Scheme – This is a great investment choice for retirees and people searching for a steady stream of interest income. An account may have a maximum of Rs 4,50,000 at any time under this plan. Individuals are permitted to create several accounts. However, the total amount in all accounts must not exceed Rs 4,50,000. A joint account may have a maximum balance of Rs 9 lakh at any time. A five-year lock-in term applies to these accounts.
  • Senior Citizen Savings Scheme (SCSS) – This is a great investment choice for retirees and people searching for a steady stream of interest income. Senior citizens who receive pension and interest income as their only annual source of income are exempted from filing tax returns under this scheme. Individuals are allowed to open multiple savings accounts under this scheme, but the maximum limit of all the accounts together should not exceed ₹15 lakh.
  • Public Provident Fund Scheme – The scheme's principal goal is to assist consumers in making little deposits and provide returns on their funds. Indians can open a PPF account at post offices or selected financial institutions, with a minimum deposit of ₹500 per year. PPF accounts come with a period of 15 years and can be extended by 5 years if required.
  • Sukanya Samriddhi Yojana – The Sukanya Samriddhi Yojana initiative aims to improve the lives of girl child. This plan was established to provide a way of saving for every family with a female child. The SSY is valid for 21 years from the date of account establishment or until the girl reaches the age of 18 years and marries. Individuals can open an account with a minimum deposit of ₹250 and can invest up to ₹1.5lakh a year.
  • National Saving Certificate (VIII issue) – This can be opened at any post office and the key characteristic of NSC Issue VIII is that there is no upper limit on the amount of money that may be invested. It also has a 6.8%2 annual interest rate and no tax deducted at source. The investment may be utilised to acquire loans and get tax advantages of up to Rs. 1.5 lakhs.
  • Kisan Vikas Patra – Kisan Vikas Patra (KVP), a savings certificate system, was launched to help small investors, especially farmers, a sense of financial discipline. This scheme comes with a lock-in period of 30 months and, under special conditions, can be withdrawn at an earlier period. This can also be used as collateral to take loans.
  • Pradhan Mantri Vaya Vandana Yojana – The Indian government has introduced a pension programme available from May 4, 2017, until March 31, 2020. The Government of India raised the maximum limit under the Pradhan Mantri Vaya Vandana Yojana plan to Rs.15 lakh in the 2018-2019 Budget Speech.

Name of Scheme

Maturity period

Post Office Saving Scheme

No period prescribed

National Savings Recurring Deposit Account

5 Years

National Savings Time Deposit Account

1 Year
2 Year
3 Year
5 Year

National Savings (Monthly Income Account) Scheme

5 Years

Senior Citizen Savings Scheme

5 Years

National Saving certificate (VIII issue)

5 Years

Kisan Vikas Patra

Variable

Public Provident Fund Scheme

15 Years

Sukanya Samriddhi Account

21 Years


Interest rate of NSS scheme

Schemes

Tenure

Investment Amount

Interest Rate

Tax Deduction

Premature Withdrawal

Post Office Saving Scheme

NA

Minimum Amount - Rs 500
Maximum Amount - No Limit

4%

Interest Earned- U/S 80TTA

NA

National Savings Recurring Deposit Account

NA

Minimum Amount - Rs 100 per month
Maximum Amount - No Limit

5.8% p.a. Compounded quarterly

Nil

Available after 3 years

National Savings Time Deposit Account

1 year, 2 year, 3 year, 5 year

Minimum Amount - Rs 1,000
Maximum Amount - No Limit

1 year- 5.5%

5 year TD- U/S 80C upto Rs 1.5 lakhs

Available after 6 months

National Savings (Monthly Income Account) Scheme

5 year

Minimum Amount - Rs 1,000
Maximum Amount - Rs 4.5 lakhs, single account
Maximum Amount - Rs 9 lakhs, joint account

6.6 % per annum payable monthly

Nil

Available after 6 months

Senior Citizen Savings Scheme

5 year

Minimum Amount - Rs 1,000
Maximum Amount - Rs 15 lakhs

7.4 % per annum, payable from the date of deposit

U/S 80C up to Rs 1.5 lakhs

Anytime after account opening

Public Provident Fund Scheme

15 year

Minimum Amount - Rs 500
Maximum Amount - Rs 1.5 lakhs

7.1 % per annum

U/S 80C up to Rs 1.5 lakhs

1 withdrawal during a financial after five years Premature withdrawal after 5 years

Sukanya Samriddhi Account

21 years from the date of account opening

On the marriage of girl child

Minimum Amount - Rs 250
Maximum Amount - Rs 1.5 lakhs

7.6% Per Annum, Yearly compounded

U/S 80C up to Rs 1.5 lakhs

After 5 years of account opening (subject to conditions)

National Saving Certificate (VIII issue)

5 Years

Minimum Amount - Rs 1,000
Maximum Amount - No Limit

6.8 % compounded annually but payable at maturity

U/S 80C up to Rs 1.5 lakhs

Allowed subject to conditions

Kisan Vikas Patra

As prescribed by the Ministry of Finance from time to time

Minimum Amount - Rs 1,000
Maximum Amount - No Limit

6.9 % per annum compounded annually

Nil

Any time before maturity


Features And Benefits Of National Savings Schemes

  • Safety – The danger of losing one's primary investment or suffering a loss is avoided since the programmes are backed by the government. This crucial feature helps both risk-averse investors and novices save responsibly without worrying about degrading their savings.
  • Assured Returns – The NSS scheme's returns are guaranteed3 and announced before they are invested. Furthermore, investors may expect set returns since they are not connected to market risks, making them relatively safe.
  • Substantial Returns – The rate of return on these savings programmes is usually modified every quarter. It is primarily done to assist people in achieving inflation-adjusted returns and maximising their assets. Notably, depending on the sort of national scheme chosen, the characteristics and benefits may differ.
  • Tax Benefits4 Section 80C of the Income Tax Act, 1961, allows most National Savings Schemes to save money on taxes. Benefits like this tend to instil financial discipline and encourage people to save more.

How To Start Investing In NSS

  • Establish Your Goals – When investing in NSS, having long-term goals may be beneficial.
  • Level of Risk – Before you invest your money, you should carefully consider the amount of risk connected with the investment choice you pick.

Withdrawal rules for NSS

According to the Income Tax Act, withdrawals from the National Savings Scheme are taxable income. As a result, under section 194EE of the Income Tax Act, any person who is accountable for paying the sum is required to deduct TDS. TDS is deducted at a rate of 10% when the withdrawal amount is paid. After deducting TDS under section 194EE, the deductor must submit a quarterly TDS report in Form 26Q and a TDS certificate in Form 16A to the deductor.

Frequently Asked Questions

  • What is the interest rate of the national saving scheme?

    The interest rate on the national savings scheme is 6.8% per annum.

  • What is the difference between NSC and NSS?

    Under Section 88 of the Income Tax Act, the National Savings Scheme (NSS) provides a return and tax advantage. The National Savings Certificate (NSC) is a certificate as part of the NSS issued by the Indian government's Department of Post that provides interest on your savings.

  • Is NSS maturity amount taxable?

    According to the Income Tax Act, withdrawals from the National Savings Scheme are taxable income. As a result, under section 194EE of the Income Tax Act, any person who is accountable for paying the sum is required to deduct TDS.

  • Why should I invest in national savings schemes?

    You may claim a tax deduction of up to Rs 1.5 lakh under section 80C in a given financial year. This tax advantage attracts a lot of investment. The schemes are safer to invest in since they are controlled by the Ministry of Finance of the Central Government of India.

  • Do NSS Schemes offer tax benefits⁴?

    NSS contributions are eligible for a tax deduction under Section 80C up to a maximum of 1.5 lakhs per fiscal year. As a result, you might benefit from tax advantages on your investments.

  • Whether NRI(s) can invest in the National Savings Schemes?

    The scheme is exclusively available to Indian residents who live in India.

  • Is a nomination facility available in National Savings Products?

    Yes. The depositor may name one or more nominees, as well as specify the share of each nominee if there are more than one.

  • Can a nomination be cancelled or changed?

    Yes. They will have to submit an application to the official, along with all supporting documents, requesting that the document be corrected. If considerable revisions to the original document are necessary, both parties will need to provide two witnesses to the registration of the rectification deed.

Disclaimer

1 https://www.indiapost.gov.in/Financial/pages/content/post-office-saving-schemes.aspx
2 https://www.nsiindia.gov.in/InternalPage.aspx?Id_Pk=182
3 Provided all due premiums are paid.
4 Tax benefits are subject to changes in tax laws. Kindly consult your financial advisor for more details.
ADV/6/22-23/596

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