What is National Savings Certificate (NSC)?
The National Savings Certificate (NSC) is a government-backed savings scheme in India, offered by India Post. It is a fixed-income investment option designed to encourage people to save while offering a safe investment platform with attractive returns. The NSC can be purchased at post offices across India, and it has two maturity periods: 5 years and 10 years. It is a popular investment choice for risk-averse individuals due to its security and guaranteed returns.
Benefits of National Savings Certificate (NSC)
- Government-backed Security: Being backed by the Indian Government, NSCs are one of the safest investment options available.
- Tax Benefits: Under Section 80C of the Income Tax Act, the investment in NSC qualifies for a tax deduction. This helps reduce taxable income.
- Attractive Interest Rates: The interest rates on NSCs are relatively high compared to other fixed-income investments like Fixed Deposits (FDs), providing a good return on investment.
- Fixed Returns: The return is fixed and is paid at maturity, so there’s no market risk involved.
- Easy Accessibility: NSCs can be purchased from any post office in India, making them easily accessible to the general public.
- Partial Liquidity: NSCs can be pledged as collateral for loans, providing partial liquidity in case of emergencies.
- Reinvestment of Interest: The interest is reinvested annually, compounding, which boosts the overall returns at maturity.
Risks of National Savings Certificate (NSC)
- Fixed Investment Period: The investment in NSC is locked for a specific period (5 or 10 years), meaning you can’t access your funds until maturity, which can be a disadvantage if you need liquidity.
- No Partial Withdrawals: Unlike other investment products like Fixed Deposits, NSCs do not allow partial withdrawals.
- Taxation: Though NSC qualifies for tax benefits under Section 80C, the interest earned is taxable. The interest is also subject to TDS (Tax Deducted at Source) if the amount exceeds a certain limit.
- Low Flexibility: NSCs do not offer much flexibility in terms of altering the investment amount or maturity period once the certificate is issued.
- Rate Fluctuations: The interest rate can be revised by the government, which may lower returns for new investors.
Top 10 National Savings Certificate (NSC) Plans in India
| Plan Name | Maturity Period | Interest Rate | Tax Benefit (Section 80C) | Liquidity | Minimum Investment | Maximum Investment | Pros | Cons |
|---|---|---|---|---|---|---|---|---|
| NSC 5 Years Plan | 5 years | 7.0% (as of 2025) | Yes | Limited (No Partial Withdrawal) | ₹100 | No upper limit | – Fixed returns – Government-backed security – Tax benefits | – No liquidity – Taxable interest income |
| NSC 10 Years Plan | 10 years | 7.0% (as of 2025) | Yes | Limited (No Partial Withdrawal) | ₹100 | No upper limit | – Longer tenure for higher returns – Government security – Tax benefits | – No early withdrawal – Interest taxable |
| Monthly Income Scheme (MIS) | Varies (5 years) | 6.6% | Yes | More Liquid (Monthly Payout) | ₹1,500 | ₹4.5 lakhs (single) ₹9 lakh (joint) | – Fixed monthly payouts – Low-risk government scheme | – Lower returns than NSC – Interest income taxed |
| Post Office Time Deposit | 1-5 years | 5.5% to 6.5% | Yes | Moderate | ₹200 | No upper limit | – Guaranteed returns – Tax benefit under 80C | – Lower returns than NSC – No flexibility in terms of tenure |
| Public Provident Fund (PPF) | 15 years | 7.1% (as of 2025) | Yes | Limited (Partial withdrawal allowed after 6 years) | ₹500 | ₹1.5 lakh per annum | – Exempt from tax on maturity – High liquidity post 6 years | – Long tenure – Partial withdrawals can reduce final return |
| Sukanya Samriddhi Account | 21 years | 7.6% (as of 2025) | Yes | Limited (Up to age of the girl child) | ₹250 | ₹1.5 lakh per annum | – High returns – Government backed – Tax-free on maturity | – Only for girl children – Lock-in period for 21 years |
| Senior Citizens Savings Scheme (SCSS) | 5 years | 7.4% (as of 2025) | Yes | Moderate (Quarterly Interest Payouts) | ₹1,000 | ₹15 lakh | – High returns for seniors – Government-backed security | – Only for seniors aged 60+ – Interest is taxable |
| Kisan Vikas Patra (KVP) | 8 years 4 months | 7.0% (as of 2025) | Yes | Limited (Maturity period fixed) | ₹1,000 | No upper limit | – Safe investment – Fixed returns – Government security | – Long maturity period – Interest is taxable |
| RBI Bonds | 7 years | 7.75% | Yes | Low (Only after maturity) | ₹1,000 | No upper limit | – High returns – Guaranteed returns – Safe government bond | – Taxable interest – Long tenure |
| Tax-free Bonds | Varies | 5.0-6.5% | No (Tax-free returns) | Low (Post maturity) | ₹1,000 | Varies | – Tax-free interest – Government backed security – No TDS | – Lower returns – Limited issue period |
Frequently Asked Questions (FAQs) about National Savings Certificates (NSC)
- What is the minimum investment required for NSC?
- The minimum investment for NSC is ₹100. You can buy multiple certificates as long as the investment per certificate is in multiples of ₹100.
- Can NSC be transferred?
- Yes, NSC can be transferred from one person to another, though the procedure is slightly complex and may require documentation.
- Is NSC tax-free on maturity?
- No, the interest earned on NSC is taxable, but the investment amount qualifies for tax deduction under Section 80C.
- Can I withdraw my NSC before maturity?
- No, NSC cannot be withdrawn before maturity. However, in case of an emergency, you may pledge it as collateral to avail of a loan.
- What happens if I miss an interest payment?
- NSC is a government-backed scheme, so you do not have to make interest payments. The interest is compounded and paid out at maturity.
- Is NSC a good investment option?
- Yes, NSC is a great option for conservative investors who are looking for a safe, long-term investment with guaranteed returns.
- What is the tax treatment on NSC?
- The interest earned is taxable as per your income tax slab, and it is subject to TDS if the total interest earned exceeds the exemption limit.
- Can I buy NSC online?
- No, currently, NSCs can only be purchased from post offices.
- Can NSC be used as collateral for loans?
- Yes, NSCs can be pledged as collateral for taking loans from banks or financial institutions.
- How does NSC compare to a Fixed Deposit?
- Both are safe investment options, but NSC offers better tax benefits, and its interest is compounded, whereas Fixed Deposit interest is paid out periodically.