National Savings Certificate (NSC) is an investment drivethat helps boost savings along with tax benefits. On the other hand, the National Pension Scheme (NPS) is an investment initiative by the Government of India that provides an income to the senior citizens, hence providing them with social security.
The National Pension Scheme (NPS) is a voluntary contribution pension scheme designed for employees from the public, private, or unorganised sectors. Under this plan, the amount should be invested at regular intervals during employment, some percentage of which can be taken out after retirement. The remaining amount from the corpus can be received after retirement, just like the monthly pension amount.
The National Pension Scheme, backed by the Government of India, offers financial security to individuals during their retirement years. This plan is meant for private, public, & unorganised sector employees, except for armed forces staff. It is considered to be one of the most reliable investment plans, offering flexible investment options, tax benefits, & market-linked returns. Individuals can undertake retirement planning by investing funds regularly during their careers to build a corpus for a secure financial future.
Provided are the differences between NSC & NPS:
| Basis of Difference | NSC | NPS |
| Objective | It is a fixed-income investment plan that can be opened at any of the post offices. The Government of India has initiated this scheme with a lock-in period of 5 years. | It is a long-term investment scheme meant for retirement purposes. This scheme was launched in the year 2004 & is governed by the Central government & the PFRDA (Pension Fund Regulatory & Development Authority) of India. |
| Tax Benefit | Tax deductions are available u/s 80c of the Income Tax Act, 1961, for a maximum of INR 1,50,000 for the premium paid. | Available u/s 80C & 80CCD. |
| Who Can Invest | Meant for everyone | Meant for private, government &unorganised sector employees. |
| Interest Rates | Fixed rate of interest, i.e. 6.8% per annum | It ranges between 9% & 12% per annum. |
| Risk Profile | Fixed Returns. Low Risk is due to their being backed by the government. | High risk & high return. |
Provided are the features & benefits of the National Savings Certificate:
The maturity period for the NSC is 5 years.
There are two types of NSC certificates, namely Type VIII & Type IX; at the moment, only Type IX is open for subscription.
As NSC is a government-backed scheme, one can claim a maximum of INR 1,50,000 u/s 80C of the Income Tax Act, 1961.
This scheme provides a guaranteed return of 7.7%, which is usually considered to be higher than fixed deposits.
The minimum amount of deposit is INR 1000 initially, which can be increased later on.
The interest earned is compounded & reinvested on its own.
At present, the interest rate for quarter 2 of the financial year 2024-2024 is 7.7% per annum, which is revised quarterly.
This scheme can be bought from any post office once the documents are submitted & KYC has been completed.
No early exit from the scheme is allowed. However, it may be accepted in some exceptional cases, such as a court order or an investor’s death.
It can also be accepted as collateral by banks or NBFCs to get secured loans.
The investor must choose a nominee from their family members to inherit the amount in case of any unforeseen circumstances.
The corpus amount would be received upon maturity. As NSC does not attract any TDS on payouts, the subscriber should pay the tax.
Provided are the features & benefits of the National Pension Scheme:
It offers flexibility in the selection of tenure & amount according to the financial objectives & risk appetite.
The National Pension Scheme is governed by the NPS Trust & managed by the Pension Fund Regulatory & Development Authority.
It provides tax advantages to both self-employed & salaried individuals.
a) Section 80CCD (1)
Get a tax deduction, maximum up to INR 1,50,000 u/s 80C.
b) Section 80CCD (1B)
Get an additional tax deduction of a maximum of INR 50,000 u/s 80C.
This scheme can be availed by any Indian resident between 18 & 70 years.
It offers low-cost & economical long term investment.
Even in circumstances of a job change or any relocation, the National Pension Scheme Account remains the same.
The funds from the superannuation account can be transferred to the National Pension Scheme account.
The selection between NSC & NPS depends on your financial needs. One should consider the fact that both NSC & NPS have their own pros & cons.
On a final note, both plans are backed by the Indian government & offer tax benefits. Also, there are some differences; hence, before finalising, one should properly evaluate both plans to make an informed decision.