How an NSC grows in five years, and what counts for 80C
How National Savings Certificate interest compounds, what ₹1,000 to ₹5 lakh becomes at 7.7%, how the reinvested interest works for Section 80C, and how NSC is taxed.
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In short
- NSC interest is compounded once a year and paid with the deposit after five years. ₹1,000 at 7.7% becomes ₹1,449.03.
- ₹1 lakh becomes ₹1,44,903.37 after five years, so ₹44,903.37 is interest.
- The rate is fixed for the certificate's five years at the rate on the day you buy it.
- In the old tax regime the deposit, and the interest of years one to four, can be claimed under Section 80C. The fifth year's interest is simply taxed.
- There is no upper limit, no TDS, and no early encashment except on death or by court order.
The National Savings Certificate, or NSC, is a five-year post office deposit with a fixed rate set by the government. It is popular with salaried people for one reason above others: it counts for the Section 80C deduction, and unlike most 80C options it locks your money away for only five years. The calculator above shows what your certificate is worth at maturity, how much interest it earns each year and how much of that counts for 80C. This guide explains each of those numbers.
How to use the calculator
- Set the amount you will invest, from ₹1,000 upwards. The minimum is ₹1,000 and certificates are in multiples of ₹100; there is no upper limit.
- Check the rate. It starts at the current NSC rate. For a certificate you bought earlier, set the rate in force when you bought it.
The results show the maturity value, the total interest, the 80C deduction in the year of purchase, the interest of years two to five that counts for 80C, and the fifth year's interest, which is taxed. The table shows every year's interest and the value at the end of the year.
The formula
NSC interest is compounded once a year, and nothing is paid until maturity:
Value after n years = deposit × (1 + rate ÷ 100)ⁿ
Maturity value = deposit × (1 + rate ÷ 100)⁵
For ₹1,000 at 7.7%:
| End of year | Interest that year | Value |
|---|---|---|
| 1 | ₹77.00 | ₹1,077.00 |
| 2 | ₹82.93 | ₹1,159.93 |
| 3 | ₹89.31 | ₹1,249.24 |
| 4 | ₹96.19 | ₹1,345.43 |
| 5 | ₹103.60 | ₹1,449.03 |
This is the same figure the post office publishes: a ₹1,000 certificate matures at about ₹1,449. The calculator works in paise, so every yearly figure adds up exactly.
What different amounts become at 7.7%
| Invested | Maturity after 5 years | Interest |
|---|---|---|
| ₹1,000 | ₹1,449.03 | ₹449.03 |
| ₹10,000 | ₹14,490.35 | ₹4,490.35 |
| ₹1,00,000 | ₹1,44,903.37 | ₹44,903.37 |
| ₹1,50,000 | ₹2,17,355.07 | ₹67,355.07 |
| ₹5,00,000 | ₹7,24,516.91 | ₹2,24,516.91 |
Every rupee grows by the same factor, about 1.449 times, so the interest is roughly 45% of what you put in.
The rate is fixed when you buy
The government sets small savings rates every quarter. NSC is 7.7% for certificates bought between 1 October and 31 December 2026, unchanged for several quarters.
What matters is the rate on the day of purchase. That rate applies for the full five years, whatever happens later. This is the opposite of PPF and Sukanya Samriddhi, where a new rate applies to the whole balance. If you expect rates to fall, NSC locks in today's rate; if you expect them to rise, it does not benefit.
How NSC works with Section 80C
This is where NSC is unusual. In the old tax regime:
The deposit counts for 80C in the year you buy the certificate, within the overall ₹1.5 lakh limit shared with PPF, EPF, ELSS, life insurance premiums, children's tuition fees and home loan principal.
The interest of years one to four counts too. NSC does not pay out interest each year; the law treats it as reinvested in the certificate. So each year you show that year's interest as income, and claim the same amount under 80C as a fresh investment. For most people the two cancel, and the interest is effectively untaxed for those years.
The fifth year's interest is only taxed. It is paid out at maturity, not reinvested, so there is nothing to claim against it.
For ₹1,00,000 at 7.7%:
| Year | Interest | Treatment |
|---|---|---|
| 1 | ₹7,700.00 | Income, and claimable under 80C |
| 2 | ₹8,292.90 | Income, and claimable under 80C |
| 3 | ₹8,931.45 | Income, and claimable under 80C |
| 4 | ₹9,619.17 | Income, and claimable under 80C |
| 5 | ₹10,359.85 | Income, taxed |
Years one to four add up to ₹34,543.52; the fifth year's ₹10,359.85 is taxed at your slab.
The catch is the ₹1.5 lakh ceiling. If your EPF and other investments already fill it, the reinvested interest gives you no extra deduction and is simply taxed. The calculator shows the figures; whether they reduce your tax depends on what else you claim, which the income tax calculator can work out.
NSC in the new tax regime
The new regime has no Section 80C. The deposit gives no deduction, and the interest is taxable year by year or at maturity, like a fixed deposit's. NSC then competes only on its rate and safety: 7.7% fixed for five years, backed by the government. Compare it with the FD calculator at your bank's five-year rate.
When to report the interest
The post office deducts no TDS on NSC. You report the interest yourself. Two methods are allowed:
- Year by year (accrual): show each year's interest as income in that year. This is the method that lets you claim the reinvested interest under 80C, and it spreads the tax across five years.
- All at maturity: show the whole interest in the year the certificate matures. Simpler, but you lose the 80C claim on the reinvested interest and the whole amount is taxed in one year, possibly at a higher slab.
Most people in the old regime use the yearly method. Whichever you choose, use it consistently.
Buying and holding an NSC
- Who can buy: any resident adult, alone or jointly with up to two other adults, a guardian on behalf of a minor, and a minor of 10 or older in their own name. NRIs and HUFs cannot buy new certificates.
- Where: at any post office, and through internet banking for post office savings account holders. Certificates are now issued electronically, in a passbook or as an e-certificate.
- Nomination: allowed, and recommended.
- Transfer: an NSC can be transferred from one person to another only in limited cases, such as to a legal heir on the holder's death.
Can NSC be encashed early?
Generally no. Premature closure is allowed only:
- on the death of a holder, or of any holder in a joint certificate;
- on forfeiture by a pledgee who is a gazetted government officer; or
- on an order of a court.
So money in NSC should be money you will not need for five years. If you need flexibility, a bank FD can be broken early with a small penalty.
NSC can, however, be pledged as security for a loan from a bank, which is useful if you need funds without breaking the certificate.
NSC against other five-year options
| NSC | Tax-saving FD | ELSS fund | |
|---|---|---|---|
| Lock-in | 5 years | 5 years | 3 years |
| Return | 7.7%, fixed | Bank's rate, fixed | Market-linked |
| Interest or gains | Taxable; years 1–4 reinvested for 80C | Taxable, TDS deducted | Taxed as capital gains |
| Safety | Government-backed | Bank deposit, insured up to ₹5 lakh | Market risk |
NSC usually pays more than a bank's five-year tax-saving FD, and its reinvested interest gives an 80C benefit no FD offers. ELSS has the shortest lock-in and the highest potential return, with the most risk.
What this calculator assumes
- Interest is compounded once a year at the rate you set, for exactly five years, and paid with the deposit at maturity.
- The rate stays the same for the full five years, as it does for a certificate.
- The 80C deduction in the year of purchase is the deposit, up to ₹1.5 lakh; the interest of years one to four is shown as claimable without checking your other 80C investments.
- The deposit is rounded to a multiple of ₹100, with a minimum of ₹1,000.
- Interest is worked out in paise each year and shown to the paisa.