How the NSC Calculator works
The National Savings Certificate (NSC) is a government-backed, fixed-income savings scheme offered by India Post, with a fixed 5-year lock-in. The interest rate is set by the government each quarter (currently 7.7% p.a., unchanged since April 2023). Interest is compounded annually and reinvested, and the full amount — principal plus accumulated interest — is paid out at maturity.
Formula used
A = P × (1 + r)t Interest = A − P
- P = Amount invested
- r = Annual interest rate (as a decimal, e.g. 7.7% = 0.077)
- t = Tenure in years (fixed at 5 for NSC)
Worked example
Investing ₹1,00,000 at 7.7% p.a. for 5 years grows to A = 1,00,000 × (1.077)5 ≈ ₹1,44,903, an interest of about ₹44,903. Since interest is reinvested each year, later years add more than earlier ones.
Tax benefits
- The amount invested qualifies for a deduction of up to ₹1.5 lakh under Section 80C.
- Interest earned in the first 4 years is deemed reinvested, so it also counts toward the 80C deduction in those years. Interest of the final (5th) year is taxable as 'Income from Other Sources'.
- There is no TDS on NSC interest, but the interest is still taxable in your hands as above.
Things to keep in mind
- NSC has a strict 5-year lock-in; premature withdrawal is allowed only in limited cases (e.g. death of the holder, court order).
- The minimum investment is ₹1,000 (in multiples of ₹100) with no maximum limit, and certificates can be pledged as collateral for loans.
- The rate is fixed for your certificate at the time of purchase, so later rate revisions do not change an existing NSC.
