What is the NSC?
National Savings Certificate is a five-year fixed-income instrument sold at post offices, backed by the Government of India. Interest compounds annually and is paid entirely at maturity.
Its distinctive feature: the interest accrued each year (except the final year) is deemed reinvested and therefore qualifies for a fresh Section 80C deduction — a genuine but widely missed benefit.
Formula & worked example
Worked example: ₹1,50,000 at 7.7% for five years → 1,50,000 × (1.077)5 = ₹2,17,437, of which ₹67,437 is interest. You claim ₹1.5 lakh under 80C in year one, and the interest accrued in years 1–4 can each be claimed again under 80C.
How to use this nsc calculator
- Enter the amount you plan to invest — there is no upper limit, though 80C caps at ₹1.5 lakh.
- The rate is set quarterly by the government; 7.7% is current.
- Read the accrual table to see the interest deemed reinvested each year.
- Declare that accrued interest annually to claim the repeat 80C benefit.
Smart tips
- Declare accrued interest as income each year and claim it under 80C — this makes it effectively tax-neutral until maturity.
- NSC can be pledged as collateral for a bank loan, unlike a tax-saving FD.
- There is no TDS on NSC interest, but it remains taxable in your hands.
- A five-year tax-saving FD is comparable — compare the current NSC rate with bank FD rates before choosing.
- NSC suits conservative investors; over 10+ years, ELSS has historically delivered far more despite the volatility.
Frequently asked questions
What is the current NSC interest rate?
Set quarterly by the government, currently 7.7%, compounded annually and paid at maturity.
Is NSC interest taxable?
Yes, it is taxable as income. However interest accrued in years 1–4 is deemed reinvested and can be claimed afresh under Section 80C.
Can I withdraw NSC before 5 years?
Only in limited cases — death of the holder, forfeiture by a pledgee, or a court order. Otherwise it is locked for the full term.
NSC or tax-saving FD?
Both have a five-year lock-in and 80C benefit. NSC often carries a slightly higher rate and can be pledged for loans; FDs are more convenient.
Want the theory behind the numbers? Read our small savings guides on the Money Blog.