NSC Calculator. Five years, compounded.
Invest ₹1,00,000 in NSC at the current 7.7% rate and it matures in 5 years at ₹1,44,903. Your interest is ₹44,903, compounded annually but paid as a single lump sum at maturity. The deposit gets a Section 80C deduction, and the reinvested interest of years 1 to 4 (about ₹34,544) can be claimed under 80C again; only the final year interest of ₹10,360 is taxable with no shelter. NSC has no TDS.
NSC Calculator
| Year | Opening balance | Interest this year | Closing balance |
|---|---|---|---|
| 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 |
| 5matures | ₹1,34,544 | ₹10,360 | ₹1,44,903 |
Your deposit of ₹1,00,000 claims Section 80C in year 1. The interest of years 1 to 4, ₹34,544 in all, is deemed reinvested and can be claimed under 80C again in each of those years, within the same ₹1.5 lakh ceiling. Only the final year's interest, ₹10,360, is taxable with no fresh 80C shelter. NSC has no TDS, so nothing is deducted at source, but the interest is still taxable in your hands.
| NSC | 5-yr tax-saving FD | PPF | |
|---|---|---|---|
| Lock-in | 5 years | 5 years | 15 years |
| 80C on deposit | Yes | Yes | Yes |
| Interest taxable | Yes, mostly 80C-shielded | Yes, fully | No, tax-free |
| TDS | None | Yes, above ₹40k | None |
| Value at year 5 | ₹1,44,903 | ₹1,38,042 | still locked |
NSC and a 5-year tax-saving FD are the closest match: both give 80C, both lock for five years. The FD figure above assumes a 6.5% rate compounded quarterly, and its interest is taxable every year with TDS once it crosses ₹40,000, so a top-slab saver keeps less than the headline. NSC has no TDS and its years 1 to 4 interest can be re-claimed under 80C. PPF sits in a different bracket: a 15-year lock-in, but fully tax-free interest and maturity. Full workings in the FD calculator and the PPF calculator.
7.7% is the rate notified for the current quarter, not a fixed contractual rate for all time. The Ministry of Finance reviews small-savings rates every quarter, and NSC has been reset several times since the VIII Issue began. The rate that applies to your certificate is the one in force on the day you buy it, and it then stays locked for your full five-year term, so this projection assuming a single 7.7% for all five years is accurate for a certificate bought this quarter, even though a certificate bought in a future quarter may carry a different rate. Interest compounds once a year and is paid only at maturity, which is why the year-by-year table above shows the balance rising each year without any payout until year 5.
NSC calculator FAQ.
What is the current NSC interest rate and who sets it?▾
The current NSC (VIII Issue) interest rate is 7.7% per annum, compounded annually but paid only at maturity. The Ministry of Finance, through the Department of Economic Affairs, notifies small-savings rates every quarter. The rate is fixed for the quarter in which you buy the certificate and then stays locked for your whole five-year term even if later quarters change. So a certificate bought this quarter keeps 7.7% for all five years, while a fresh certificate bought next quarter could carry a different rate. Historically the NSC rate has ranged roughly between 6.8% and 8.5%, so this projection assumes 7.7% holds throughout, which it may not exactly.
Can I withdraw NSC before the 5-year term ends?▾
As a rule, no. NSC has a fixed five-year term with no partial tenure, and you cannot break it early the way you can a bank fixed deposit. There are only three narrow exceptions: the death of the holder (or of any holder in a joint account), forfeiture by a pledgee who is a Gazetted Officer, or an order of a court of law. Outside those, your money stays locked for the full five years. Because the interest is reinvested and only paid out at maturity, early exit is simply not built into the product, which is its main trade-off against an FD that at least lets you borrow against the deposit.
How does Section 80C treat the NSC deposit and its interest?▾
The amount you invest qualifies for a Section 80C deduction of up to ₹1.5 lakh in the year of purchase. The interesting part is the interest itself: because NSC interest is reinvested rather than paid out, the interest accruing in years one to four is treated as a fresh investment and also qualifies for 80C in each of those years, within the same ₹1.5 lakh annual ceiling. Only the fifth and final year interest gets no 80C benefit and is fully taxable. NSC deducts no TDS at all, but you must still declare the accrued interest as income, either year by year on an accrual basis or as a lump sum at maturity.
NSC vs a 5-year tax-saving FD: which is better?▾
Both give an 80C deduction and lock your money for five years, so they compete directly, and three differences decide it. First, NSC deducts no TDS, whereas a tax-saving FD deducts TDS once yearly interest crosses ₹40,000 (₹50,000 for senior citizens). Second, NSC interest for years one to four can be re-claimed under 80C, softening the tax, while FD interest is simply taxable each year. Third, rates move independently: NSC is set quarterly by the government, FD rates by each bank, so compare the actual numbers on the day you invest. One point favours the FD: you can take a loan against it, which NSC does not allow, though NSC can be pledged as security.
Can NSC be pledged for a loan, held jointly, or bought at a post office?▾
Yes on all three. NSC can be pledged or transferred as security for a loan to banks, housing finance companies and specified authorities by submitting the prescribed transfer form at the post office, a common way to raise liquidity without breaking the certificate. It can be held jointly by up to three adults (Joint A, payable to all holders, or Joint B, payable to any survivor), and it can be bought for a minor by a guardian, or by a minor above ten in their own name. NSC is sold at every post office across India, and since it moved fully to electronic (e-mode) form, many banks are also authorised to issue it.