What is NSC (National Savings Certificate)?
National Savings Certificate (NSC) is a fixed-income investment scheme offered by the Government of India through post offices. It is one of the safest investment options with guaranteed returns and tax benefits under Section 80C of the Income Tax Act.
Key Features of NSC
- Interest Rate: 7.7% per annum (Q4 FY 2025-26), compounded annually but payable at maturity
- Tenure: Fixed 5 years from the date of issue
- Minimum Investment: ₹1,000
- Maximum Investment: No upper limit
- Tax Benefit: Qualifies for Section 80C deduction (up to ₹1.5 lakh)
- Safety: 100% government-backed with zero credit risk
- Premature Withdrawal: Not allowed except on death or court order
NSC Interest Calculation Formula
Maturity Value = Principal × (1 + Rate/100)^Years
For ₹1,00,000 at 7.7% for 5 years:
= 1,00,000 × (1.077)^5
= 1,00,000 × 1.45037
= ₹1,45,037
Tax Treatment of NSC
Investment: NSC investment qualifies for Section 80C deduction up to ₹1.5 lakh per financial year.
Interest (Years 1-4): Interest accrued in the first 4 years is deemed to be reinvested and qualifies for Section 80C deduction in the year it accrues.
Interest (Year 5): Interest earned in the 5th year is fully taxable as per your income tax slab. It does not qualify for any deduction.
NSC vs PPF vs FD Comparison
| Feature | NSC | PPF | Bank FD |
|---|---|---|---|
| Interest Rate | 7.7% | 7.1% | 6.5-7.5% |
| Tenure | 5 years | 15 years | 7 days to 10 years |
| Tax on Interest | Taxable | Tax-Free | Taxable + TDS |
| 80C Benefit | Yes | Yes | Only Tax Saver FD |
| Max Investment | No Limit | ₹1.5L/year | No Limit |
Frequently Asked Questions (FAQs)
Who can invest in NSC?
Any resident Indian individual can invest in NSC. Minors can also invest through guardians. However, HUF (Hindu Undivided Family) and NRIs cannot invest in NSC.
Can I take a loan against NSC?
Yes, NSC certificates can be pledged as collateral for loans. Banks and financial institutions accept NSC as security and typically offer loans up to 75-90% of the certificate's surrender value.
What happens if NSC certificate is lost?
You can apply for a duplicate certificate by submitting an indemnity bond and affidavit at the post office where you purchased the NSC. There may be a small fee for duplicate issuance.
Can NSC be transferred to another person?
Yes, NSC can be transferred from one person to another before maturity. The transfer must be done at the post office, and the new holder will receive the maturity amount.
How is NSC interest calculated and paid?
NSC interest is compounded annually but paid only at maturity after 5 years. The interest is automatically reinvested each year, and you receive the principal plus accumulated interest as a lump sum at maturity.