The National Savings Certificate (NSC) is a fixed-income savings scheme backed by the Government of India. It is a low-risk investment designed to encourage savings and help investors earn assured returns along with tax benefits.
What Is NSC?
NSC (National Savings Certificate) is a small savings scheme that allows individuals to invest a lump sum amount for 5 years and earn guaranteed returns. The government offers this scheme through post offices across India. It’s a popular choice for conservative investors and tax savers.
How Does NSC Work?
When you invest in a National Savings Certificate (NSC), your money earns interest every year, which is compounded annually. However, you don’t receive yearly payouts—instead, the total amount (principal + interest) is paid out only at maturity, after 5 years.
Key Features of NSC
- Safe & Secure:
NSC is a low-risk investment backed by the Government of India, making it highly trustworthy and secure for all types of investors. - Fixed Tenure:
It comes with a lock-in period of 5 years, making it ideal for medium-term financial goals. - Attractive Returns:
NSC currently offers an interest rate of 7.7% per annum (as of latest update), ensuring good returns compared to traditional fixed deposits. - Compounded Annually:
The interest gets compounded every year and is paid out along with the principal at maturity, helping your money grow faster. - Tax-Saving:
Your investment in NSC is eligible for tax deduction up to 1.5 lakh per year under Section 80C of the Income Tax Act. - Affordable Investment:
You can start investing with just 1,000, and there’s no upper limit on the amount you can invest. - No TDS:
The interest earned is not subject to Tax Deducted at Source (TDS), which means you receive the full maturity amount without any deduction.
Income Tax Benefits of NSC
The National Savings Certificate (NSC) not only offers safe returns but also helps you save on taxes. Here’s how:
- You can claim a tax deduction of up to 1.5 lakh per financial year under Section 80C of the Income Tax Act by investing in NSC.
- The interest earned every year is automatically reinvested, and it also qualifies for deduction under Section 80C. This boosts your total eligible tax savings.
- However, the interest earned in the final (5th) year is not reinvested. So, it is taxable as per your income tax slab in that year.
Who Can Open an NSC Account?
Only resident individuals are allowed to open a National Savings Certificate (NSC) account. If you are an Indian citizen living in India, you can easily invest in NSC through any post office.
You can open an NSC account in the following ways:
- In your own name (single account)
- Jointly with another adult (joint account – Type A or Type B)
- On behalf of a minor (as a guardian or parent)
Note: NRIs and HUFs (Hindu Undivided Families) are not eligible to invest in NSC.
How Do You Open an NSC Account?
You can open an NSC account at any India Post Office:
- Visit the nearest post office.
- Fill out the NSC application form.
- Provide KYC documents (Aadhaar, PAN, Passport-size photo).
- Choose the deposit amount and make the payment (cash, cheque, or online transfer).
- The post office will issue the NSC in passbook mode.
NSC Deposit Limits
You can start investing in the National Savings Certificate (NSC) with a minimum amount of 1,000. After that, you can invest in multiples of 100.
There is no maximum limit on how much you can invest in NSC. However, you can claim tax benefits under Section 80C of the Income Tax Act only up to 1.5 lakh per financial year.
Maturity Period of NSC
The National Savings Certificate (NSC) comes with a fixed maturity period of 5 years. When you invest in NSC, your money stays locked in for five years, during which it earns compounded interest every year.
After completing the 5-year period, you receive the full maturity amount, which includes your initial investment (principal) plus the total accumulated interest.
NSC does not allow premature withdrawal, except in special cases like the death of the holder or court orders. So, it’s best suited for investors who can stay invested for the full term.
NSC Interest Rate
As of the July to September 2025 quarter, the National Savings Certificate (NSC) offers an interest rate of 7.7% per annum. The Government of India reviews this rate every quarter, but once you invest, your rate remains fixed for the entire 5-year term.
This means you will earn 7.7% interest annually, compounded yearly, and receive the full amount (principal + interest) at maturity. Even if the government changes the rate later, your return stays locked at 7.7% for your investment period.
The stable and attractive interest rate makes NSC a smart choice for safe and long-term savings.
Compounding Frequency in NSC
The National Savings Certificate (NSC) uses annual compounding to grow your investment. This means the interest is added to your principal once every year, and in the next year, you earn interest on the new total.
However, you don’t receive interest every year. Instead, the entire amount—your original investment plus compounded interest—is paid at maturity, after 5 years.
This annual compounding helps your money grow faster, making NSC a smart choice for long-term, risk-free savings.
NSC in Passbook Mode
Earlier, the National Savings Certificate (NSC) was issued as a paper certificate. Now, the government has made it more convenient by offering NSC in passbook mode.
When you invest, the post office provides a physical passbook that records all your investment and maturity details. This passbook works like a savings record, making it easier to track and manage your investment.
Passbook mode is also safer than old paper certificates, as it reduces the risk of loss or damage and makes verification simpler during withdrawal.
What to Do If You Lose Your NSC Passbook
If you lose your NSC certificate or passbook, don’t worry—you can get a duplicate passbook by following a few easy steps:
- Visit the post office where you opened your NSC account.
- Submit a written application requesting a duplicate passbook.
- Provide identity proof along with important details like your NSC account number and investment amount.
- The post office will verify your details and issue a duplicate passbook for your records.
Pre-Mature Closure of NSC
The National Savings Certificate (NSC) comes with a fixed lock-in period of 5 years, and you cannot close it early for general reasons like emergencies or personal needs.
However, the government allows premature closure only in a few specific situations:
- In case of the death of the certificate holder
- If there is a court order directing the closure
- On forfeiture by a pledgee, such as a bank or financial institution where the NSC was pledged as security
Outside of these conditions, you must wait until the full 5-year term to withdraw your investment and receive the maturity amount.
Loan Facility Against NSC
You can use your National Savings Certificate (NSC) as collateral to get a loan from banks or financial institutions. This allows you to raise funds without breaking your investment.
To apply for a loan against NSC, follow these steps:
- Pledge your NSC certificate or passbook with the lender
- Obtain an acceptance letter from the post office, confirming the pledge
- The bank or lender will hold your NSC until you repay the loan
NSC Account Transfer
The National Savings Certificate (NSC) account can be transferred under certain conditions to make it more flexible and accessible for investors.
You can transfer your NSC in the following cases:
- From one post office to another
- From one person to another (only in special cases like death, court order, etc.)
Nomination Facility
When you open a National Savings Certificate (NSC) account, you can nominate one or more people to receive the maturity amount in case of your death. This helps ensure a smooth and hassle-free claim process for your loved ones.
You also have the flexibility to:
- Change the nominee anytime during the investment period
- Cancel or update the nomination by submitting a request at the post office
Can NRIs and HUFs Invest in NSC?
No, Non-Resident Indians (NRIs) and Hindu Undivided Families (HUFs) are not eligible to invest in NSC. Only individual resident Indians can open and operate NSC accounts.
Final Thoughts
The National Savings Certificate (NSC) is a smart and safe investment for those who want guaranteed returns, tax benefits, and capital safety. It suits salaried individuals, first-time investors, and those with low-risk tolerance. Since it’s government-backed, your money stays protected while growing steadily.
Visit our website for the latest IPO updates and other financial information.