National Savings Certificate 5-yr compounding.
Maturity after 5 years
₹1.45 L
Interest: ₹44.9K
Investment
₹1 L
Interest
₹44.9K
National Savings Certificate (issue VIII) is a 5-year small-savings instrument from India Post. Interest compounds annually but is paid only at maturity. Investment qualifies under Section 80C up to ₹1.5 lakh; accrued interest is also deemed reinvested and qualifies under 80C (except the final year).
Maturity = P × (1 + r)⁵
The current NSC rate is 7.7% per annum, compounded annually but payable on maturity. NSC has a fixed 5-year tenure with no premature withdrawal except on death or court order.
Interest is taxable at slab rate but is deemed reinvested for the first 4 years — so it also qualifies for fresh Section 80C deduction each year (within the ₹1.5 lakh limit). Only the final-year interest is taxed in your hands as income.
NSC is shorter (5 years vs 15) and offers slightly higher rate. PPF is fully tax-free at maturity and partially withdrawable. For lump-sum tax saving with a 5-year horizon NSC is excellent; for long-term tax-free compounding choose PPF.
Yes — banks accept NSC certificates as collateral for secured loans up to 75-85% of the face value. The pledge is registered with the post office. NSC is one of the most widely accepted post-office instruments for loan-against-security.