Question 1

What is NSC and what is the current interest rate?

Accepted Answer

NSC (National Savings Certificate) is a fixed-income investment scheme by the Indian Post Office. It has a 5-year lock-in period and currently offers 7.7% annual interest, compounded annually but paid at maturity. There is no maximum investment limit, and the minimum is Rs 1,000. NSC is available at any post office.

Question 2

Is NSC eligible for tax deduction under Section 80C?

Accepted Answer

Yes, NSC investment qualifies for tax deduction under Section 80C up to Rs 1.5 lakh per financial year. Additionally, the accrued interest (except in the final year) is deemed reinvested and also qualifies for 80C deduction. The maturity amount is taxable under 'Income from Other Sources' in the final year.

Question 3

How does NSC interest compounding work?

Accepted Answer

NSC interest is compounded annually — each year's interest is added to the principal and earns interest in subsequent years. However, the entire accumulated amount is paid only at maturity. For example, Rs 1,00,000 invested at 7.7% grows to approximately Rs 1,44,903 after 5 years.

Year	Opening	Interest	Closing
1	₹1,00,000	₹7,700	₹1,07,700
2	₹1,07,700	₹8,293	₹1,15,993
3	₹1,15,993	₹8,931	₹1,24,924
4	₹1,24,924	₹9,619	₹1,34,544
5	₹1,34,544	₹10,360	₹1,44,903

Financial Calculators