NSC (National Savings Certificate): Features, Tax Benefits & Eligibility

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Hiral Vakil

Income Tax
NSC
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Tax Savings & Deductions

NSC is a small savings scheme offered by the Indian Post office. The certificates earn fixed interest, which is currently at 8.0% per anum. You can get a tax deduction on your investment. However, returns earned are taxable at maturity.

The main objective of investing in the NSC is to avail tax benefits and risk-free returns on investment. This scheme is popular amongst government employees and other salaried taxpayers. However, it does not earn inflation-beating returns like Tax saving Mutual funds.

Want to know what other tax deductions you can claim?
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Want to know what other tax deductions you can claim?
Read our article to understand the different types of tax deductions available to you and how to avail them.
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Features of NSC:

Who can invest? 

What are the tax benefits?

Deposits up to INR 1,50,000/- per annum qualifies for IT deduction under section 80C of Income Tax Act. The interest earned is taxable. But each year the interest is considered reinvested in the NSC. This means that every year you show the interest amount as income and then reinvest that income. Since it is deemed reinvested, it qualifies for a fresh deduction under Sec 80C, thereby making it tax-free. When the NSC matures, it does not receive any tax deduction since the amount is not reinvested. The investor will have to pay tax on the final interest.

Want to know what 80C covers?
Read our article here to see all the deductions you can claim under this section and reduce your tax liability.
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Want to know what 80C covers?
Read our article here to see all the deductions you can claim under this section and reduce your tax liability.
Read More

What are the documents required to purchase NSC?

You must be KYC compliant to purchase National Savings Certificates.

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FAQs

Is the maturity value of NSC taxable?

Interest earned on the maturity of is taxable. During the investment tenure, annual accrued interest is not paid to the investor but instead, it is deemed reinvested. Since it is reinvested, it qualifies for deduction under section 80C thereby making it tax-free. However, when the NSC matures, the interest of the sixth year is not reinvested but paid out to the investor. So this interest amount upon maturity is not taxfree.

Is NSC one time investment?

NSC is a one-time investment. You can invest a minimum of Rs. 100 and there is not an upper limit for investment. Once you invest , then you will receive the maturity amount after 5 years of the lock-in period.

Can HUF invest in NSC?

No. HUFs and Trusts can not invest in NSC. The scheme is specially designed for Government employees, businessmen and other salaried classes.

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