National Savings Certificate (NSC) and Its Tax Benefits

In the vast landscape of investment options available in India, the National Savings Certificate (NSC) stands out as a secure and reliable avenue, especially favored by those looking for tax-saving benefits. The NSC is not only backed by the government, ensuring its safety, but it also offers attractive interest rates and tax advantages, making it an appealing choice for many investors.

What is the National Savings Certificate (NSC)?

The NSC is a fixed income investment scheme available at post offices across India. It is a government-backed savings bond designed for small to mid-level investors to encourage savings while enjoying tax benefits.

Features of NSC

  1. Duration: NSCs are available in two maturity periods: 5 years and 10 years.
  2. Interest Rate: The interest rates for NSCs are revised quarterly by the Government of India. They are typically competitive and often higher than many bank fixed deposits.
  3. Minimum and Maximum Investment: The minimum investment amount for an NSC is INR 100, with no maximum limit. However, only investments up to INR 1.5 lakh can avail tax benefits under Section 80C.
  4. Certificates: Upon investment, you receive a physical certificate. However, with digital progression, e-certificates are now also becoming common.
  5. Transferability: NSCs can be transferred from one person to another, but only once during its tenure and only after a year from the date of issue.

Tax Benefits of NSC

The allure of the NSC, beyond its safety and returns, is predominantly its tax advantages:

  1. Section 80C Deduction: The amount you invest in the NSC is eligible for deduction under Section 80C of the Income Tax Act. This means that you can claim a deduction of up to INR 1.5 lakh in a financial year from your total income, thus reducing your taxable income.
  2. Compound Interest: The interest accrued on NSC is compounded annually. While the interest earned is taxable, it gets reinvested and qualifies for a fresh deduction under Section 80C. This means, for a 5-year NSC, every year's interest, except for the last year, acts as a deduction for the subsequent year.

Who Should Invest in NSC?

Given its features, NSC is suitable for:

  • Those who seek a low-risk, guaranteed return investment.
  • Individuals who want to avail tax benefits under Section 80C.
  • Investors who do not have regular internet access or prefer traditional savings methods, as NSC can be easily purchased from post offices.

How to Invest in NSC?

Investing in NSC is straightforward:

  1. Visit a Post Office: Head to your nearest post office and express your desire to purchase an NSC.
  2. Fill out the Form: Obtain the NSC form, fill in the required details, and provide necessary documents like PAN, address proof, and identity proof.
  3. Payment: You can make the payment via cash, cheque, or demand draft.
  4. Obtain the Certificate: After the payment, you will receive a physical NSC certificate or an e-certificate, as per your preference.


In the fluctuating world of investments, the National Savings Certificate offers a haven of reliability. It might not promise exorbitant returns like equities, but it assures your principal amount and offers consistent returns. Add to this the significant tax advantages, and it's clear why the NSC has remained a favorite among the Indian populace for decades.

In conclusion, if you're searching for a conservative, tax-saving, and dependable investment option, the NSC is certainly worth considering. Before making an investment decision, however, always ensure to evaluate all available options and possibly consult with a financial advisor to choose the best fit for your financial goals.

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