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An Overview of National Savings Certificate (NSC)

Updated on January 19, 2022 , 57219 views

National Savings Certificate or NSC is an investment avenue promoted by the Government of India. It offers individuals the benefits of both Investing as well as tax deductions. In addition, the risk appetite of this scheme is very less and it provides fixed Income. NSC is classified as an investment scheme having a fixed duration. It is one of the popular schemes like Public Provident Fund (PPF) or Kisan Vikas Patra (KVP). This instrument helps individuals to inculcate savings and investment habit.


So, let us have an in-depth understanding of what is a national savings certificate, benefits of the national saving certificate, its tax applicability, and so on.

National Saving Certificate

This scheme was launched post-independence wherein; the government decided to raise money from the people and use the same for the country’s development. The government through this scheme aims is to channelize the whole investment towards the progress of the entire nation. Individuals have two options with respect to the investment tenure in NSC, that is, 5 Years and 10 Years. However, the 10-year option has been discontinued. Individuals can purchase NSC through post offices.

Type of NSC Certificates

To cater the various requirements of people, NSC certificates are divided into three types:

  • Single Holder Certificate: In this category, the certificate is issued to the individuals themselves or on behalf of a minor on the investment done.
  • Joint A Type Certificate: Here, the certificate is issued to both the adults. In addition, the maturity proceeds are payable to both the adults jointly.
  • Joint B Type Certificate: In this case, the certificate is again issued to both the individuals. However, the maturity amount is payable to either of the holders.

National Savings Certificate Interest Rate

The interest rates with effect from 01.04.2020, is 6.8% p.a. This interest amount is compounded annually. The interest rate is fixed for an investment done during the said period and does not change over time. For example, if an individual invests in NSC when the interest rate is 7.6% p.a. then, his/her investment will bear the same returns. So, even if there is a change in the interest rates in the future, it will not affect the investment.

Eligibility for Investing in National Saving Certificate

Residents of India are allowed to invest in National Savings Certificate. However, in case of VIII issue of NSC, trusts and hindu undivided family (HUFs) were not allowed to invest. Even, non-resident individuals are not allowed to invest in National Savings Certificate. Individuals can purchase NSC by visiting any of the Post Office branches.

Once they go to the post office, they need to fill the NSC investment form which contains details like name of the account holder, payment mode, type of account, and so on. Along with the form the individual also has to attach documents related to identity proof and address proof, and a photograph. Then, individuals need to pay the required money either through cash, Demand Draft, by transferring from post office Savings Account or through electronic means of transfer. Once the payment is made, the post office issues a certificate in the name of individuals invested based on the mentioned amount.

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National Savings Certificate- Investment Details

Minimum Deposit

The minimum deposit in case of National Savings Certificate is INR 100. This amount can be deposited as per the desire of the individual.

Maximum Deposit

There is no limit on the maximum deposit amount in NSC. However, individuals can claim tax Deduction under Section 80C of income tax Act, 1961, for investment up to INR 1,50,000 for a financial year.

Investment Tenure

The investment tenure in case of NSC is 5 years. On maturity, individuals can claim the entire amount back to their account. However, if not claimed the entire amount gets reinvested in the scheme.

Rate of Return

The rate of returns in case of National Savings Certificate is fixed.

Premature Withdrawal

Individuals cannot make a premature withdrawal in case of NSC. It can be done only in case of:

  • Death of the holder or holders in case of joint holder system
  • By order of a court of law
  • On forfeiture by a pledgee being a Gazetted Government Officer

Loan Facility

Individuals can pledge NSC as a Collateral against loans.

The details of National Savings Certificate or NSC are tabulated as follows.

Parameters Details
Minimum Deposit INR 100
Maximum Deposit No Limit
Investment Tenure 5 Years
Rate of Return Fixed
Premature Withdrawal Not Allowed except specific situations
Loan Facility Available

Features & Benefits of NSC

  • The investment amount in case of National Savings Certificate is very low, that is, INR 100.
  • Individuals can earn Fixed Income on the NSC investment.
  • This investment avenue offers individuals benefits of both tax deduction as well as investing. In addition, though, the income earned on NSC investment is taxable yet; there is no TDS deducted.
  • The maturity period for NSC is 5 Years. Earlier, NSC had a maturity term of 10 years too, nevertheless; it has been discontinued.
  • Though NSC may or may not provide Inflation-beating returns yet; the interest earned on it gets compounded and reinvested by Default. Individuals can claim the interest amount at the time of maturity.

Tax Impact on Investment in National Savings Scheme

The tax impact in case of investment in National Savings scheme can be divided into two situations, that is:

During Investment

During investment, individuals can claim a tax deduction of up to INR 1,50,000 under Section 80C of Income Tax Act, 1961. However, there is no maximum limit on the investment in NSC. However, being a tax savings investment, they have a lock-in period of five years.

During Redemption

At the time of Redemption, individuals can claim both principal and interest amount. In this case, the interest earned on NSC is taxable under the head income from other sources. However, in this case, there is no TDS deducted and individuals have to pay Taxes at their end.

National Saving Certificate Calculator or NSC Calculator

NSC calculator helps indiviudals to calculate how much amount will their NSC investment earn at the end of the maturity period. The input data that needs to be entered in this calculator includes investment amount, rate of returns, and tenure. So, let us have a detailed understanding of this calculator with an illustration.


Parameters Details
Investment Amount INR 15,000
Investment Tenure 5 Years
Interest Rate on NSC 7.6% p.a.
Net Amount at the End of 5th Year INR 21,780 (approx)
Total Profit on Investment INR 6,780

Thus, if you are an individual seeking a safe investment option, then choose National Savings Certificate or NSC.


1. What is the fixed interest rate of NSC?

A: NSC is an investment scheme in which you can earn a fixed income by purchasing it from your nearest post office. Currently, you can earn an interest income of 6.8% per annum on your NSC investment.

2. Is it easy to open an NSC?

A: Yes, anyone who is looking for a stable source of income can open an NSC account. All you need are requisite documents like PAN Card and Aadhar number.

3. What is the compounding of NSC?

A: In NSC's case, the interest earned is locked away, and usually, you cannot withdraw it. The rate of return is locked at the time of investment for the tenure of investment. This is known as the compounding of interest. The return is compounded for which the NSC is purchased. In other words, the entire amount is given to the account holder when the account matures at the end of five years.

4. What is corpus post maturity of NSC?

A: When your NSC matures, the entire amount, along with interest earned, will be handed over to you. There will no Tax Deducted at Source (TDS). This is known as the corpus post maturity of NSC.

5. Can I withdraw money from NSC?

A: The lock-in period of an NSC is five years, and money cannot be withdrawn from the NSC during these five years. If you need to withdraw money before lock-in, you will have to pay the forfeiture, and the pledge has to be authorized by a Gazetted Government Officer to make the withdrawal.

6. Do I need to have a nominee for an NSC?

A: Yes, you can add a nominee for all three types of NSC accounts.

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