NSC: the guaranteed 5-year 80C investment
The National Savings Certificate is a Post Office scheme with a government guarantee — your principal and a fixed return of 7.7% p.a. are fully secured. No market risk, no exit before 5 years.
NSC vs. other 80C instruments (2025)
| Instrument | Rate | Tenure | Tax on maturity |
|---|---|---|---|
| NSC | 7.7% p.a. | 5 years | Interest taxable (slab rate) |
| Tax-saving FD | 6.5–7.5% | 5 years | Interest taxable (slab rate) |
| PPF | 7.1% p.a. | 15 years | Tax-free (EEE) |
| ELSS | 12–18% (historical) | 3 years (min) | 12.5% LTCG above ₹1.25L |
| Sukanya Samriddhi | 8.2% p.a. | 21 years | Tax-free |
NSC is ideal for conservative investors who want guaranteed returns with 80C benefit and can lock money for 5 years.
NSC interest: the reinvestment quirk
NSC doesn't pay annual interest — it's compounded and paid at maturity. But each year's interest accrual is deemed a reinvestment into NSC, so it qualifies for 80C deduction in years 1–4. Only the 5th year's interest is fully taxable at maturity.
Example: ₹1 lakh invested at 7.7% over 5 years:
- Maturity value: ~₹1,44,903
- Total interest: ~₹44,903
- Year 5 interest (~₹10,470): taxable at your slab rate
- Net effective return after 30% tax on year 5 interest: ~7.2%
How to buy NSC
NSC can be purchased at:
- Any post office branch (walk-in with PAN + Aadhaar)
- India Post Payments Bank app (digital)
- DOP Internet Banking portal