NSC (National Savings Certificate): Invest ₹1.5 Lakh to Save Tax and Grow Wealth

 What is the National Savings Certificate (NSC)?

The National Savings Certificate (NSC) is a fixed-income investment scheme backed by the Government of India, available at all Post Office branches. It’s primarily targeted at small and medium savers who seek guaranteed returns without taking on market risk.

With a lock-in period of 5 years and an attractive interest rate (currently 7.7% p.a., compounded annually but payable at maturity), the NSC serves dual purposes:

• Wealth accumulation
• Tax-saving under Section 80C of the Income Tax Act

Key Features of NSC

Let’s break down the most important features of the National Savings Certificate that make it a preferred choice for millions:

✅ Government-Backed Security

Since NSC is issued by the Ministry of Finance, your investment is completely safe and risk-free.

✅ Tax Benefit under Section 80C

You can claim a tax deduction of up to ₹1.5 lakh per financial year under Section 80C.

✅ Attractive Interest Rate

The current interest rate is 7.7% per annum, compounded annually and payable at maturity.

✅ Low Entry Barrier

You can start investing with as little as ₹1,000, and there is no upper limit on investment.

✅ Fixed Tenure

The maturity period is fixed at 5 years.

✅ No TDS

There is no TDS deducted on interest earned, making it tax-deferred income until maturity.

Why Should You Invest ₹1.5 Lakh in NSC?

🔹 1. Save on Income Tax

The biggest reason to invest ₹1.5 lakh in NSC is to maximize your tax deductions. Under Section 80C, the entire amount you invest (up to ₹1.5 lakh annually) qualifies for tax exemption. This allows you to:

• Lower your taxable income
• Save up to ₹46,800 in taxes if you're in the 30% slab

🔹 2. Build Long-Term Wealth

With compounded interest, your money grows faster. A ₹1.5 lakh investment in NSC at 7.7% annually will grow to around ₹2.19 lakh after 5 years—completely risk-free.

🔹 3. Ideal for Conservative Investors

If you are risk-averse and prefer predictable returns over stock market volatility, NSC is a dependable tool in your financial arsenal.

🔹 4. Perfect for Goal-Based Savings

Whether it’s for your child’s education, marriage, or a future down payment on a home, investing in NSC provides a disciplined way to save.

How to Invest in NSC

Investing in NSC is incredibly easy. Here’s a step-by-step guide:

 Step 1: Visit the Nearest Post Office

Go to your nearest Post Office that offers savings schemes.

 Step 2: Fill the NSC Application Form

You’ll need to fill Form-A for a new NSC certificate. If you have an India Post savings account, the process is faster.

 Step 3: Submit Required Documents

• Aadhaar Card (mandatory)
• PAN Card
• Passport-size photo
• Address proof (if needed)

 Step 4: Choose the Investment Amount

Start from ₹1,000 and invest in multiples of ₹100. There is no upper limit, but to claim full 80C benefits, invest up to ₹1.5 lakh.

 Step 5: Make Payment

You can pay by cash, cheque, demand draft, or even use your Post Office savings account balance.

 Step 6: Receive e-Certificate

Earlier, NSC used to be issued as physical certificates. Now, you'll receive an e-Certificate linked to your savings account or email.

Who Should Invest in NSC?

NSC suits a wide range of investors:

🔸 Salaried Individuals

Ideal for salaried people looking to reduce taxable income under Section 80C.

🔸 Senior Citizens

Offers higher safety and assured returns without the stress of market risks.

🔸 First-Time Investors

Perfect for beginners who want to start saving and earning interest without market exposure.

🔸 Parents Saving for Children

Provides guaranteed returns for future educational or marriage expenses.

Interest Calculation Example

Let’s say you invest ₹1,50,000 in NSC at 7.7% interest for 5 years.

Final maturity amount: ₹2,17,552

Note: The interest earned is taxable in the year it is accrued but is reinvested for 80C benefit except in the final year.

Taxation Rules for NSC

Though the investment amount qualifies for Section 80C benefits, the interest earned is taxable.

💼 Here’s how it works:

• Interest earned every year (except the final year) is deemed reinvested, hence also qualifies for 80C deduction.
• Interest in the 5th year is not reinvested, and is fully taxable as income from other sources.
• No TDS is deducted, so you must declare it in your ITR.

Loan Facility Against NSC

Need funds before maturity? NSC allows you to:

• Use your NSC as collateral to take a loan from banks or financial institutions.
• Submit the e-Certificate and pledge the investment.
• Helps avoid breaking the deposit prematurely.

Premature Withdrawal Rules

Though NSC has a lock-in period of 5 years, premature withdrawal is allowed only in the following cases:

1. Death of the account holder
2. On court order
3. Forfeiture by a pledgee (like a bank)

Otherwise, early closure is not permitted.

How to Redeem NSC on Maturity

Once the NSC matures (after 5 years), you can redeem it by:

• Visiting your Post Office
• Submitting your ID and NSC e-Certificate
• The maturity amount is credited to your Post Office savings account

There’s no reinvestment option, so you’ll need to open a new NSC for continued investment.

 Difference Between NSC and Other Tax-Saving Instruments

 Frequently Asked Questions (FAQs)

1. Is NSC better than a 5-year FD?

Yes, NSC offers better compounded returns, reinvestment benefits under 80C, and no TDS, making it more tax-efficient.

2. Can NRIs invest in NSC?

No, NRIs are not eligible to invest in National Savings Certificate.

3. What happens if I lose my NSC certificate?

You can apply for a duplicate certificate by submitting a written request and verification documents at the Post Office.

4. Can I invest in NSC online?

NSC is not fully available online yet. However, you can buy NSC via internet banking through selected banks linked with IPPB.

5. Can I add a nominee?

Yes, NSC allows you to add a nominee at the time of investment or later.

Is NSC Worth It?

If you're looking for a safe, government-backed investment that offers solid returns, tax benefits, and a fixed maturity period, then investing up to ₹1.5 lakh in NSC is an ideal option. You not only secure your future wealth but also enjoy yearly tax savings—making it a smart strategy for conservative savers and salaried individuals alike.

By combining disciplined savings with guaranteed returns, the National Savings Certificate remains one of India’s most trusted financial products. So if you haven’t already, it’s time to add NSC to your investment portfolio.