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NSC

Investment

National Savings Certificate

A fixed-income Indian government savings scheme available at post offices with a 5-year lock-in, fixed interest compounded annually, and principal eligible for Section 80C deduction.

Definition

The National Savings Certificate (NSC) is a fixed-income Indian government savings scheme available at post offices, designed for small and medium savers seeking guaranteed, low-risk returns. It has a fixed 5-year tenure, a government-set interest rate compounded annually, and the invested principal qualifies for a tax deduction under Section 80C.

Because NSC is backed by the Government of India, it carries no credit risk, making it a popular instrument for conservative investors and those seeking to combine fixed returns with a tax deduction.

Formula

Maturity Value = Principal × (1 + r)^n

where r is the annual compounded interest rate and n is the number of years (5). Interest compounds annually but is paid out as a lump sum only at maturity, along with the principal.

Worked Example

You invest ₹1,00,000 in NSC at an annual interest rate of 7.7%, compounded annually over 5 years.

Maturity Value = ₹1,00,000 × (1.077)^5 ≈ ₹1,44,995

Your ₹1,00,000 investment grows to approximately ₹1,44,995 at maturity — a total interest earning of about ₹44,995 over 5 years. Use the NSC calculator to compute the exact maturity value at the current government-notified rate.

Key Things to Know

  • Section 80C benefit applies to the principal: Your NSC investment (up to ₹1.5 lakh) reduces your taxable income under Section 80C, similar to PPF and tax-saving FDs.
  • Interest is taxed annually, not at maturity: Even though you don't receive the interest until the certificate matures, it's taxed each year as accrued income — plan for this when estimating your annual tax liability.
  • No premature withdrawal in normal circumstances: Unlike a recurring deposit, NSC funds are locked for the full 5-year term except in specific exceptional cases.
  • NSC vs PPF: PPF has a longer 15-year tenure and tax-free interest (EEE status), while NSC has a shorter 5-year lock-in but taxable interest — choose based on your liquidity needs and tax bracket.
  • Rate resets quarterly for new investments: The interest rate is fixed for the life of your certificate once purchased, but new NSC purchases follow the rate notified for that quarter by the government.

Related Calculators

NSC Calculator →Calculate National Savings Certificate maturity value and interest earned on a 5-year lump-sum investment at the current 7.7% p.a. rate, compounded annually.

Related Terms

PPFPublic Provident FundFDFixed DepositSection 80CSection 80C — Income Tax Deduction

Frequently Asked Questions

NSC interest rates are set quarterly by the Government of India and have generally ranged between 7% and 7.7% in recent years, compounded annually but paid out only at maturity. Check the latest rate on the India Post or National Savings Institute website before investing, as it changes each quarter.
NSC has a fixed 5-year maturity period with no premature withdrawal option except in specific cases like the investor's death, court order, or forfeiture by a pledgee. This makes it a genuinely locked-in, low-risk savings instrument rather than a flexible one.
Yes, the principal invested in NSC qualifies for a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act in the old tax regime. Additionally, the interest earned each year (except the final year) is deemed reinvested and also qualifies for further 80C deduction, though it's still taxable as income.
Interest earned on NSC is taxable as 'Income from Other Sources' in the investor's hands each year, even though it isn't paid out until maturity — it is treated as accrued and reinvested. Only the interest in the final year, which is paid out along with the principal, is not eligible for further 80C deduction.
NSC suits conservative Indian investors seeking a government-guaranteed, fixed-return instrument with a Section 80C tax benefit, particularly those without access to salaried EPF contributions. It's less suitable for investors prioritizing liquidity, since funds are locked for the full 5-year term.