National Savings Certificate: A Secure Investment with 7.7% Interest

National Savings Certificate provides a secure investment option. With a 7.7% interest rate, a Rs 1 lakh investment grows to over Rs 1.44 lakh in five years. Tax deductions are available under Section 80C for those following the old tax regime. NSC accounts can be transferred in specific situations.

The National Savings Certificate (NSC) remains one of the most popular small savings schemes for investors looking for a low-risk, government-backed investment option.

When stock markets are witnessing volatility and fixed deposit (FD) rates at many scheduled banks are low, NSC provides attractive interest rates to a lot of investors looking a long-term investment option.

NSC interest rate

The current NSC rate of 7.7% is higher than the rates offered by many banks on their five-year fixed deposits. Since the interest rate remains locked in for the entire tenure at the time of investment in NSC, investors know about the maturity amount they will get after five years irrespective of future interest rate movement.

Also read: Sukanya Samriddhi Yojana calculator: Can you build Rs 50 lakh corpus in SSY by investing Rs 50,000/year?

What will a Rs 1 lakh investment in NSC give you after 5 years?

If you invest Rs 1 lakh in NSC at the current interest rate of 7.7% per annum, the investment will grow to approximately Rs 1,44,903 at maturity after five years.

Interest in NSC is payable at maturity (compounded yearly).

NSC maturity calculation for Rs 1 lakh investment

Investment amount: 1,00,000

Interest rate: 7.7% p.a.

Tenure: 5 years

Maturity value: 1,44,903

Total interest earned: 44,903

Does investing in NSC offer tax benefits?

Deposits in NSC qualify for a tax deduction of up to Rs 1.5 lakh under Section 80C of the Income ax Act for taxpayers opting for the old tax regime.

The same benefit is not available to new tax regime followers.

Can an NSC account be transferred?

An NSC account can be transferred from one individual to another, subject to the condition that the transferee is eligible under the NSC scheme in the following cases, namely:

On the death of an account holder in case of a single account or all the account holders in a joint account, the amount will be transferred to the legal heirs or the nominees.

On an order of a court, on pledging, in the event of the death of any of the account holders in a joint account, the account will be transferred in the name of the surviving account holder or account holders.

NSC premature account closure rules

The account is not eligible for closure before maturity except in the following cases, namely:

On the death of an account holder in a single account, or any or all the account holders in a joint account.

On forfeiture by a pledgee being a gazetted officer, when the pledge is in conformity with this scheme.

When ordered by a court.

NSC premature account closure interest payment rules

If you close an NSC account within one year of opening it, you will get back only the amount you originally invested. No interest will be paid.

- If you close an NSC account after one year but before completing three years, you will receive your principal amount along with interest at the rate applicable to the Post Office Savings Account for the period the account was held.

If you close an NSC account after completing three years, you will receive the principal amount along with the applicable interest accrued up to the date of closure, as per the rules of the scheme.