The National Savings Certificate (NSC) is a government-backed 5-year fixed-income scheme paying 7.7% per annum (compounded yearly, paid at maturity) for the July–September 2026 quarter. There is a ₹1,000 minimum and no upper limit. The amount invested qualifies for a Section 80C deduction up to ₹1.5 lakh under the old regime. Interest is taxable each year as Income from Other Sources but there is no TDS, and for years 1–4 the reinvested interest earns a fresh 80C deduction.
NSC Key Details for FY 2026-27
Every headline feature of the National Savings Certificate (NSC-VIII issue), with the current rate and tax treatment.
| Parameter | Details |
|---|---|
| Interest rate (Jul–Sep 2026) | 7.7% p.a. compounded annually, paid at maturity |
| Minimum investment | ₹1,000 (in multiples of ₹100 thereafter) |
| Maximum investment | No upper limit |
| Tenure / lock-in | 5 years — no premature withdrawal except on death or court order |
| Section 80C | Yes — investment eligible up to ₹1.5 L (80C, old regime only) |
| Interest taxability | Accrued interest taxable yearly as Income from Other Sources |
| TDS on interest | No TDS — self-declare in ITR |
| Available at | All post offices (India Post); e-NSC via IPPB / eNSC portal |
| Nomination / joint holding | Nomination available; up to 3 adults jointly |
NSC-VIII issue. Rate unchanged since 1 Apr 2025; verified on the small-savings notification for Q2 FY 2026-27 (Jul–Sep 2026).
The 80C benefit on NSC (and its reinvested interest) is available only if you file under the old tax regime. Under the default new regime there is no 80C deduction, though the NSC interest is still taxable. Check which regime is better for you before relying on NSC purely for tax saving.
How NSC Interest Is Taxed — the 80C Loop
NSC interest is compounded annually but not paid out each year — it accumulates and is paid with the principal at the end of 5 years. Even so, the accrued interest is taxable every year under Income from Other Sources. The planning point: for years 1–4 that interest is deemed reinvested and qualifies as a fresh 80C investment, so the deduction offsets the taxable interest.
| Year | Accrued interest (₹1L @ 7.7%) | Taxable that year? | 80C offset? |
|---|---|---|---|
| Year 1 | ₹7,700 | Yes | Yes — reinvested |
| Year 2 | ₹8,293 | Yes | Yes — reinvested |
| Year 3 | ₹8,932 | Yes | Yes — reinvested |
| Year 4 | ₹9,619 | Yes | Yes — reinvested |
| Year 5 (maturity) | ₹10,359 | Yes | No — not reinvested |
Illustrative on ₹1,00,000 at 7.7% p.a.; total maturity value ≈ ₹1,44,903. Interest may also be offered on an at-maturity basis, but annual accrual is the accepted method.
₹1L NSC over 5 years
Year-5 interest tax (30% slab)
A common mistake is to declare the entire NSC interest only in year 5 when it is paid. The correct method is to add each year's accrued interest to Income from Other Sources and claim the matching 80C for years 1–4. See taxation of NSC interest for the full working.
Not sure how to report accrued NSC interest and 80C each year? Let a CA file it correctly.
File ITR with a CA →NSC vs PPF — Which Is Better?
NSC
- 5-year lock-in — shorter commitment
- No investment cap (80C benefit capped at ₹1.5 L)
- Interest taxable yearly; Yr 1–4 get 80C offset
- No TDS; can be pledged for a bank loan
PPF
- 15-year lock-in — long-term wealth
- EEE: interest exempt u/s 10(11), maturity tax-free
- ₹1.5 L/year cap; partial withdrawal from year 7
- Also 80C eligible (old regime)
Verdict: PPF wins on tax efficiency — its interest is fully tax-free (EEE), ideal for long-term goals and higher tax brackets. NSC offers a higher rate and a shorter 5-year lock-in with no annual cap, making it useful for medium-term goals or when the ₹1.5 lakh 80C limit is nearly full from other instruments. Compare with PPF and ELSS vs PPF before deciding.
NSC Among Tax-Saving & Fixed-Income Options
How NSC sits next to the other common 80C and investment products, and how each is taxed — since not everything with a "tax benefit" is tax-free on the way out.
| Instrument | Lock-in | Deduction | Returns taxed how |
|---|---|---|---|
| NSC | 5 yr | 80C | Interest at slab (no TDS) |
| PPF | 15 yr | 80C | Exempt (EEE) |
| 5-yr tax-saving FD | 5 yr | 80C | Interest at slab; TDS 10% (FD tax) |
| ELSS (equity) | 3 yr | 80C | Equity LTCG 12.5% >₹1.25L (112A) |
| NPS | Till 60 | 80CCD(1B) +₹50k | 60% tax-free / 40% annuity at slab |
| SGB (gold bond) | 8 yr | None | Maturity redemption CG-exempt for individuals |
ELSS is equity, so gains follow the capital-gains regime (23 Jul 2024): equity LTCG 12.5% above ₹1.25L, STCG under 111A at 20%. Deductions apply under the old regime only; 80CCD(1B)/(2) for NPS have separate limits.
NSC gives a fixed, government-backed return with zero market risk — but the interest is fully taxable, so post-tax it can trail EEE options like PPF and long-held equity taxed at 12.5% under Section 112A. Use NSC for the capital-protection slice of a portfolio, not as your only tax-saver.
How to Invest in NSC
- 1Choose channelPost office or India Post eNSC / IPPB online
- 2Submit KYCAadhaar + PAN (mandatory); photo for physical
- 3Pay (min ₹1,000)Cash, cheque or online transfer
- 4Get certificatePhysical or e-NSC credited to your account
- Aadhaar and PAN card (PAN mandatory for the investment)
- NSC-VIII application form (post office or downloadable)
- Investment of at least ₹1,000 (multiples of ₹100)
- Nominee details for the nomination facility
- Keep the certificate safe as 80C proof for ITR
- Note the maturity date — 5 years from purchase
✓NSC suits you if
- You want a safe, fixed, government-backed return
- You still have 80C headroom under the old regime
- You want a 5-year horizon, no annual cap
- You may want to pledge it for a loan
!Look elsewhere if
- You want tax-free maturity (prefer PPF — EEE)
- You are on the new regime (no 80C benefit)
- You want equity-linked growth (consider ELSS)
- You need liquidity before 5 years
Choosing between NSC, PPF, ELSS and NPS for your 80C? Get a tailored plan.
Talk to a TaxClue CA →- NSC scheme & rate: indiapost.gov.in (Small Savings, Q2 FY 2026-27)
- Section 80C & taxation of interest: incometax.gov.in
- PPF interest exempt u/s 10(11); capital-gains regime effective 23 Jul 2024
- Small-savings rates unchanged for Jul–Sep 2026 (Ministry of Finance notification)
Disclaimer: This guide is general information based on the law and notifications in force when it was last updated. It is not professional advice for your case — rates, thresholds and due dates change, so check the current position or speak to our CA team before you act on it.