Savings
NSC interest rate: 7.7% for five years, and the tax mechanic inside it
The National Savings Certificate pays 7.7% compounded annually, so ₹1,00,000 matures at ₹1,44,903. The deduction that cancels the tax, and the exit you do not get.
The National Savings Certificate (VIII Issue) pays 7.7% a year, compounded annually and paid in full at the end of five years. A certificate of ₹1,00,000 bought today matures at ₹1,44,903. The rate is identical for every buyer at every counter in India — no senior citizen band, no 80-plus band, no bulk rate, no branch that pays a quarter-point more — and it has stood at 7.7% since 1 April 2023.
Figures below were read on 10 September 2026 from the National Savings Institute’s own rate tables, and the rules from the National Savings Certificates (VIII Issue) Scheme, 2019 as amended in May 2020. India Post’s scheme pages returned an error to every automated request on 10 September 2026 and nothing here is taken from them; where a counter and the notified scheme appear to differ, the notified scheme binds. Check the rate entered in the passbook on the day you buy.
What ₹1,00,000 actually becomes
Interest accrues at the end of each completed year and is added to the balance, so the fifth year earns interest on the first four years’ interest too.
| Year | Interest accrued | Balance carried forward | Per ₹1,000 |
|---|---|---|---|
| 1 | ₹7,700 | ₹1,07,700 | ₹77.00 |
| 2 | ₹8,293 | ₹1,15,993 | ₹82.93 |
| 3 | ₹8,931 | ₹1,24,924 | ₹89.31 |
| 4 | ₹9,619 | ₹1,34,544 | ₹96.19 |
| 5 | ₹10,360 | ₹1,44,903 | ₹103.60 |
Total interest is ₹44,903 on ₹1,00,000, or ₹2,24,517 on ₹5,00,000. These are our own figures at 7.7% compounded annually, not a table printed by the scheme — the published maturity tables are a separate problem, dealt with below.
Buying is unusually simple. The minimum is ₹1,000 and any further sum in multiples of ₹100. There is no maximum, either per account or across every account one person holds, and an individual may open any number of them. That absence of a ceiling is the scheme’s quiet advantage over the rest of the family, which stops at ₹30 lakh for the Senior Citizens Savings Scheme, ₹1,50,000 a year for the Public Provident Fund and ₹9 lakh for a single-holder Monthly Income Scheme account. Since the 2018 General Rules there is usually no printed certificate either — the accounts office issues a passbook or statement of account. The name survived the paper.
The rate is locked on the day you buy
Small savings rates are notified quarterly, on 1 April, 1 July, 1 October and 1 January. What is easy to miss is that NSC is a locked-rate instrument: whatever is in force on the day of purchase runs for the full five years, so a revision on 1 October 2026 would apply only to certificates bought from that day. That is the whole difference between NSC and PPF, whose balance earns whatever is notified each quarter for the life of the account.
| Period | NSC rate |
|---|---|
| 1 April 2016 to 30 September 2016 | 8.10% |
| 1 January 2018 to 30 September 2018 | 7.60% |
| 1 July 2019 to 31 March 2020 | 7.90% |
| 1 April 2020 to 31 December 2022 | 6.80% |
| 1 January 2023 to 31 March 2023 | 7.00% |
| 1 April 2023 to 30 September 2026 | 7.70% |
The 2020 row is the one to look at. A buyer in March 2020 locked 7.9% for five years; a buyer a fortnight later locked 6.8% to the same maturity, worth about ₹36,500 less on ₹5,00,000. The date of purchase is as much of a decision as the product is.
Taxed every year, and reinvested every year
This is where NSC differs from a bank deposit, and it is almost always described badly.
Paragraph 5(3) of the scheme provides that interest accruing at the end of each year up to the end of the fourth year is deemed to have been reinvested on the holder’s behalf and aggregated with the face value. The fifth year’s interest is not reinvested; it is added at maturity and paid out.
Two consequences follow at once. The interest is taxable as it accrues, at your slab rate as income from other sources, not in year five when the cash arrives — so one certificate produces taxable income in five separate financial years. And the reinvested amount is a fresh subscription, one of the investments the Income Tax Department lists for the deduction long known as section 80C. For years one to four the accrual is taxed and the same amount is deductible; the two cancel.
On ₹1,00,000 for a taxpayer in the 30% slab paying 4% cess:
| Year | Accrual | Tax at 30% plus cess | Deduction available | Net |
|---|---|---|---|---|
| 1 | ₹7,700 | ₹2,402 | ₹7,700 | nil |
| 2 | ₹8,293 | ₹2,587 | ₹8,293 | nil |
| 3 | ₹8,931 | ₹2,787 | ₹8,931 | nil |
| 4 | ₹9,619 | ₹3,001 | ₹9,619 | nil |
| 5 | ₹10,360 | ₹3,232 | none | −₹3,232 |
Two conditions have to hold for that middle column to net to zero, and for most savers now neither does. The deduction exists under the old regime only, and the new regime has been the default since well before the Income-tax Act, 2025 came into force on 1 April 2026. The ₹1,50,000 ceiling is also shared: if a provident fund contribution alone fills it, the reinvested interest gets nothing. Old versus new tax regime sets out which side you are on. Without the offset, a 30%-slab taxpayer keeps about 5.5% a year on a 7.7% certificate.
A note on the number. The department’s own guidance still lists the National Savings Certificate under section 80C of the repealed Income-tax Act, 1961; commentary on the 2025 Act places the relief in section 123 read with Schedule XV, capped at ₹1,50,000, whose text we could not read on a primary source. Treat “80C” here as the name of the relief, not as a current citation.
On withholding, the scheme is silent. The 1989 rules it replaced said expressly that interest is liable to tax on annual accrual but that no tax shall be deducted at the time of payment of discharge value — a statement about the counter’s obligation, not about yours. If nothing is deducted, nothing has been settled. The scheme entitles you to a certificate of annual accrual on demand; ask for it and put the accrual in that year’s return. Our guide to tax on FD interest has the accrual rule in full.
There is no early exit
Most deposits can be broken for a fee. NSC cannot be broken at all. Paragraph 7 permits premature closure in exactly three circumstances: the death of the holder in a single account or of all holders in a joint account; forfeiture by a pledgee who is a gazetted officer; and an order of a court. Wanting the money back is not on the list. Where one of the three does apply, what comes out depends on how long the certificate has run — under one year, only the principal; between one and three years, interest at the post office savings account rate of 4.0% for the complete months held; after three years, the amount in the scheme’s own table.
That table is where the published scheme has fallen behind. Its two tables cover certificates bought between 12 December 2019 and 31 March 2020 and those bought on or after 1 April 2020, and neither has been re-notified since the amendment of 5 May 2020. Read literally, a certificate bought this week falls into the second — whose figures are built on 6.8%, the rate that applied in April 2020, not the 7.7% being paid. It shows a three-year closure value of ₹1,184.29 per ₹1,000 against a maturity value of ₹1,389.49, both from a rate no current buyer gets.
The structure behind the tables is consistent, and worth stating because the scheme never does. Both resolve, to the paisa, to the contract rate less exactly one percentage point, compounded annually and stepped in half-years: the 6.8% table is 5.80% throughout, and the 2019-20 table, built on 7.9%, is 6.90% throughout. Applied to a 7.7% certificate that implies 6.7%, which on ₹1,00,000 would pay about ₹1,29,616 at four years against ₹1,34,544 of accrued value — a cost of roughly ₹4,900. That is our arithmetic on the two notified tables, not a published figure, and a counter dealing with a 2026 certificate may work from something else. Ask for the calculation in writing.
The alternative to closing is to pledge. Paragraph 6 lets an account be transferred as security on an application in Form-3 with the pledgee’s acceptance letter. The pledgee is treated as the depositor until it is transferred back, and the 7.7% keeps running. Whether your bank will lend against it is its decision — the same question as a loan against an FD.
Maturity, and the day after it
The deposit matures on completion of five years from the date of deposit, and is repaid on an application in Form-2. Nothing happens automatically.
Leave it and the General Rules take over: an account which has matured but not been closed continues to earn interest at the post office savings account rate until it is closed — 4.0%, unchanged since 1 December 2011. On a certificate grown to ₹1,44,903 that is a fall from ₹11,158 a year to ₹5,796, from the day after maturity, with no notice. A year of inattention costs about ₹5,400 on a ₹1 lakh certificate.
There is no auto-renewal and no extension either. Unlike the post office time deposit, a matured NSC cannot be rolled into a fresh term: you close it and buy a new certificate at the then-current rate, which is the moment to check whether another scheme in the post office savings family suits you better.
Who can hold one, and what cannot be done with it
A single holder account may be opened by an adult for himself, or on behalf of a minor or a person of unsound mind of whom he is the guardian, or by a minor who has reached ten. A Joint A account is held by up to three adults and payable to all jointly or to the survivors; a Joint B account is payable to any one of them. The scheme is for individuals, with no provision for a Hindu Undivided Family or a company. Aadhaar is compulsory under the General Rules, and PAN or Form 60 must follow within two months of the balance exceeding ₹50,000 — in practice, from the outset.
Transfer between people is far more restricted than the old rules allowed. Paragraph 8 confines it to four cases: death of the holder or of all joint holders; an order of a court; pledging; and, in a joint account, the death of one holder. You cannot gift a modern NSC to a relative. Buying it in the intended holder’s name at the outset is the only route.
Nominate at purchase, because the alternative is slow. Where no nomination is in force at death and no succession certificate is produced within six months, up to ₹5 lakh may be paid on an affidavit, a letter of disclaimer and a bond of indemnity; above ₹5 lakh a court’s succession certificate is needed, which is the difference between a fortnight and a year. Up to three surviving nominees or heirs may instead continue the account to maturity as if they had opened it themselves.
Where NSC sits in the family
Rates are for the quarter ending 30 September 2026 and apply identically at every post office and every authorised bank.
| Scheme | Rate | Term | Ceiling | Interest paid |
|---|---|---|---|---|
| National Savings Certificate | 7.7% | 5 years | None | Compounded, at maturity |
| Post office time deposit, 5 years | 7.5% | 5 years | None | Yearly, compounded quarterly |
| Senior Citizens Savings Scheme | 8.2% | 5 years | ₹30 lakh | Quarterly |
| Sukanya Samriddhi | 8.2% | Tied to the girl’s age | ₹1,50,000 a year | Compounded, tax-free |
| Public Provident Fund | 7.1% | 15 years | ₹1,50,000 a year | Compounded, tax-free |
| Kisan Vikas Patra | 7.5% | 115 months | None | Compounded, at maturity |
| Monthly Income Scheme | 7.4% | 5 years | ₹9 lakh single | Monthly |
The comparison people reach for first is NSC against the five-year post office time deposit, and the twenty-basis-point gap is mostly a convention. The time deposit compounds quarterly, turning 7.5% nominal into an effective 7.7136% a year — fractionally above NSC’s 7.7% compounded annually. What separates them is where the interest goes: the time deposit pays it out on each anniversary and earns nothing further on it, while NSC rolls it back in. On ₹5,00,000 over five years that is ₹1,92,840 of cash against ₹2,24,517 of growth. Redeposit every payout promptly and the two finish level; leave them in a savings account at 4.0% and NSC wins by about ₹15,600, and spend them as they arrive and the gap is about ₹31,700.
For a buyer aged 60 or over, neither is the first stop. The Senior Citizens Savings Scheme pays 8.2% quarterly, and NSC has no senior band to close the gap. Fill SCSS to its ₹30 lakh ceiling, then let NSC take the overflow — it is the ceiling-free scheme in the family, which is what an overflow needs.
For long-horizon money the tax treatment matters more than the headline. Sukanya Samriddhi at 8.2% and PPF at 7.1% are exempt at all three stages, so a 30%-slab taxpayer keeping 5.5% of NSC’s 7.7% is beaten by PPF’s tax-free 7.1%. NSC wins on a dated five-year need, for which PPF’s fifteen-year lock is the wrong shape. NPS versus PPF covers the retirement end of the same trade-off, and the income tax calculator will show which slab you are in.
Nothing to insure, and nothing to split
Deposit insurance of ₹5 lakh per depositor per bank, covering principal and accrued interest together in the same right and capacity, is why a large sum at one bank is usually split across several. NSC is not a bank deposit, so DICGC cover does not reach it and neither does the ₹5 lakh ceiling. The scheme is notified by the Central Government under the Government Savings Promotion Act, 1873, and sets no maximum: there is nothing to split for, which is what makes the absent maximum a real advantage rather than a formality. Its 7.7% also sits above the general-public peak of every bank on our comparison of FD interest rates as those cards stood when the site last checked them. What NSC does not carry is liquidity. What the bank cover reaches is in DICGC deposit insurance.
Before you buy
| If this describes you | NSC fits? | What to do instead |
|---|---|---|
| You may need the money inside five years | No | A post office time deposit, or a bank FD you can break |
| You have a dated need exactly five years out | Yes | Buy in one lot; note the maturity date |
| You are 60 or over | Only as overflow | Fill SCSS at 8.2% to ₹30 lakh first |
| You are on the new tax regime | Weakly | The 80C offset does not exist; compare after tax |
| Your ₹1,50,000 ceiling is already full | Weakly | The reinvested interest gets no deduction either |
| You want tax-free growth over 15 years | No | PPF, or Sukanya Samriddhi for a daughter |
| You want more than ₹30 lakh in one sovereign product | Yes | NSC has no maximum |
| You want monthly or quarterly income | No | The Monthly Income Scheme, or SCSS |
Four things to do at the counter. Buy in the name of the person who is to keep it, because it cannot be transferred later. Register a nominee. Ask for the annual accrual certificate and declare the accrual each year, whether or not anything was deducted. And put the maturity date in a calendar with a reminder a month before, because from the day after it the certificate earns 4.0% and nobody will tell you.
Common questions
Is the NSC interest rate fixed for the whole five years?
Yes. The Ministry of Finance notifies small savings rates every quarter, but a certificate carries the rate in force on the day it was bought for its entire five-year term. A revision announced for 1 October 2026 would apply to certificates bought from that date and would not touch one already held. That is the opposite of the Public Provident Fund, whose balance earns whatever is notified each quarter for the life of the account. NSC has stood at 7.7% since 1 April 2023.
Can I close an NSC before five years?
Only in three situations, and none of them is changing your mind. Paragraph 7 of the 2019 Scheme allows premature closure on the death of the holder or of all joint holders, on forfeiture by a pledgee who is a gazetted officer, and when a court orders it. Closed inside one year, only the principal comes back. Between one and three years, interest is paid at the post office savings account rate of 4.0% for the complete months held. After three years the notified table applies. There is no ordinary exit at all.
Is NSC interest tax-free?
No. It is taxable at your slab rate as income from other sources, and it is taxed as it accrues each year, not when the money arrives at maturity. What softens that for four of the five years is the deeming rule: interest accruing at the end of years one to four is reinvested into the certificate, and a reinvested amount is itself eligible for the deduction long known as section 80C. Under the old regime, and only if the ₹1,50,000 ceiling has room, the deduction offsets the tax. The fifth year's interest is not reinvested and gets no offset.
Is tax deducted at source on NSC?
The 2019 Scheme says nothing about deduction at source, and the 1989 rules it replaced said in terms that interest is liable to tax on annual accrual but that no tax shall be deducted at the time of payment of discharge value. We could not read India Post's own current statement on the point, so treat the absence of a deduction as an administrative fact rather than a tax exemption. The interest is taxable whether or not anything is withheld, and it has to be declared each year in your return.
NSC at 7.7% or the five-year post office time deposit at 7.5%?
The gap is smaller than it looks. The time deposit compounds quarterly, which lifts 7.5% to an effective 7.7136% a year, marginally above NSC's 7.7% compounded annually. The real difference is what happens to the interest: the time deposit pays it out on each anniversary, so it stops earning unless you redeposit it yourself, while NSC rolls it back in automatically. Over five years on ₹5,00,000 that is ₹1,92,840 of cash against ₹2,24,517 of compounded growth. Choose NSC for accumulation, the time deposit for income.
Sources
Rates and rules on this page were read directly from the following sources on the dates shown. Figures change — if you are about to act on one, confirm it at the source.
- National Savings Certificate-VIII Issue — Interest Rate Since Inception (current row 01-04-2023 to 30-09-2026, 7.70%)
- Interest Rate on National Savings Schemes — scheme-wise table, w.e.f. 1st April 2025 onwards (FY 2026-27, July–September column)
- National Savings Certificates (VIII Issue) Scheme, 2019 — full text (G.S.R. 919(E) dated 12 December 2019, as amended by G.S.R. 284(E) dated 5 May 2020)
- National Savings Certificate-VIII Issue — scheme summary
- The National Savings Certificates (VIII-Issue) Rules, 1989 — rule 24, income tax
- Government Savings Promotion General Rules, 2018 — rule 6 identification, rule 9 payment of interest, rule 18 issue of passbook
- Post Office Savings Account Scheme — Interest Rate Since Inception (current row 01-12-2011 to 30-09-2026, 4.0%)
- National Savings Time Deposit Account Scheme — scheme summary (deduction on the 5-year deposit)
- National Savings Time Deposit Scheme, 2019 — full text, paragraph 7(2) interest compounded quarterly and payable annually
- Which ITR form applies — deductions available under the old and the default regime
- Guide to deposit insurance