THE government introduced a 10-year National Savings Certificate (NSC), which will earn an interest rate of 8.7 per cent per annum.

The notification for the launch of the new savings instrument, 10-year National Savings Certificate (IX-Issue), 2011, has been issued, an official statement said.

The scheme will come into effect from December 1, it added.

Investments in NSC will earn interest at the rate of 8.7 per cent compounded semi-annually, it said, adding that on an investment of Rs 100, the depositor will get Rs 234.35 on maturity of the NSC.

There is no upper limit for investment in the certificate, it added.

The new scheme will give better returns along with tax benefit to savers.

At present, the maturity period of NSC is six years and it qualifies for tax relief for investment up to Rs 1,00,000 under Section 80C.

The decision to raise the maturity period of NSC has been taken on the basis of the recommendations of the committee for comprehensive review of national small savings fund (NSSF), headed by Shyamala Gopinath, the former deputy governor of Reserve Bank of India.

Under the new scheme, the certificate can be transferred from the post office where it is registered, to any other post office and can be pledged as a security.

This certificate will be available in the denominations of Rs 100, Rs 500, Rs 1,000, Rs 5,000 and Rs 10,000.

The spread on 10-year NSC (new instrument) will be 50 percentage point higher than the 10-year government security. The interest rates for every financial year will be notified before April 1 of that year.