National Savings Certificate (NSC)

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Hiral Vakil

Income Tax
Tax Savings & Deductions
Last updated on January 30th, 2024

National Savings Certificate – NSC post office savings product is a popular investment scheme backed by the Government of India to encourage small savings among individuals. It is a safe, secure, and long-term investment scheme that guarantees a fixed rate of return over a specific time period. Moreover, the National Savings Certificate offers tax benefits making it an ideal investment opportunity for risk-averse investors and for those who are looking to save on taxes.

What is a National Saving Certificate?

National Savings Certificate (NSC) is a savings scheme that primarily encourages small to mid-income investors to invest along with availing tax benefits under Section 80C of the Income Tax Act. This scheme has a lock-in period of 5 years and has a risk-free return on investment. Currently, the NSC interest rate is 7.7% p.a. and it is revised by the government regularly every year.

Let’s Summarize the NSC scheme in the below table:

Minimum InvestmentINR 1000
Lock-in Period5 years
NSC Interest Rate7.7% p.a.
Risk ProfileLow Risk
Tax BenefitsDeduction up to INR 1.5 lakhs u/s 80C
Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.
Income Tax Calculator
Calculate income tax liability for FY 2020-21. Compare tax liability as per New vs Old Tax Regime.

What are the Features of NSC?

Types of NSC

NSC scheme offered two types of certificates i.e., the NSC VIII issue (5-year lock-in period) & the NSC IX issue (10-year lock-in period). However, w.e.f. from 20th December 2015, NSC IX was discontinued, and currently, only NSC VIII is available for investors to subscribe to.

Eligibility for investing in NSC 

The government launched the National Saving Certificate as a saving scheme only for Residential Individuals. Hence, this investment option is not available for NRIs, HUFs, Trusts, or any other person other than individuals.

Any individual looking for capital protection with a guaranteed return can choose to invest in NSC. They can simply visit any post office and purchase the scheme. However, it is essential to note that, unlike other fixed-income schemes like tax-saving Mutual Funds or Public Provident Funds, NSC does not earn inflation-beating returns.

Note: In a case where the individual wants to purchase the NSC, they have to make sure that they are prompt KYC compliant.

The Tax Benefit

The investment made up to INR 1,50,000 per annum is eligible for claiming deduction under section 80C. Moreover, the interest earned in the 1st 4 years is by default re-invested in the scheme. 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 Section 80C, thereby making it tax-free.

However, at the maturity (5th year) the interest does not receive any tax deduction since the amount is not reinvested. Hence, The investor will have to pay tax on the final interest (receivable in the 5th year) as per the applicable slab rate.

Documents Required to Purchase NSC

Following is the list of documents to purchase the NSC:

Ways to invest in NSC

Previously, Banks and Post Offices pre-printed NSC certificates. However, the same has been discontinued. However, currently, the individual can invest via 2 modes:

What is the Premature Withdrawal Procedure of NSC?

Even though NSC has a lock-in period of 5 years, it allows premature withdrawals in the following scenarios:

Note that withdrawing the certificates before the completion of 1 year will result in not receiving the interest amount. In such cases, only the principal amount will be receivable. However, if the certificates are withdrawn after completing 1 year, you will receive the entire contribution along with the accrued interest.

The following are the necessary documents for the withdrawal process:

Comparison with other Tax Saving Schemes

Investment Interest p.a. Lock-in Period Risk Profile
NSC 7.7%
5 years Low
NPS 8% to 10%
Till retirement Market-related risks
ELSS 12% to 15%
3 years Market-related risks
PPF 7.1%
15 years Low
FD 4% to 8%
5 years Low
Find the best plan
Find the best plan
Find the best plan
Find the best plan


Is the maturity value of NSC taxable?

Interest earned on maturity 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 tax-free.

Is NSC one time investment?

NSC is a one-time investment. You can invest a minimum of INR 1000 (in multiples of INR 100 i.e. Minimum deposit of INR 100) and there is no 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.

Is there a lock-in period in NSC?

Yes, the lock-in period is equal to the maturity period of the certificates i.e. 5 years. One can redeem it early but only under specific conditions.

Am I allowed to take a loan on the basis of NSC?

Yes, one can take a loan by keeping their certificates as collateral.

Can the nomination be changed in NSC?

Yes, the nomination can be canceled or changed at any time by filling out Form 3 and paying a nominal fee of INR 5.

Got Questions? Ask Away!

  1. Hey @sushil_verma

    There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.

  2. Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.

    For eg,

    • Medical allowance is exempt up to INR 15,000 on a reimbursement basis.
    • Children education allowance is exempt up to Rs. 200 per child per month up to a maximum of two children.
    • Conveyance allowance is exempt up to a maximum of Rs. 1600 per month.

    Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.

  3. The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).

    Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).

    As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.

  4. Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback. :slight_smile:

  5. Hey @shindeonkar95

    In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.

    However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.

    Hope, it helps!

  6. Hello,

    Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?

    There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?

    I couldn’t find anything on this. Any help is appreciated.

  7. Hello @Veejayy,

    Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.

    Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.

    These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!

    Also, interest earned on these bonds will be taxable.

    Hope this helps!

  8. Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total

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