NSC - National Savings Certificate

Are you looking for a safe way to grow your money while saving tax? Many Indians prefer stable investments over risky options and that’s where government-backed savings schemes come in.

One of the most trusted and easy-to-understand choices is the National Savings Certificate (NSC). Issued by India Post and available through select banks, NSC is a low-risk, fixed-return investment that helps you grow your savings securely while enjoying tax benefits under Section 80C of the Income Tax Act.

It’s especially suited for first-time or conservative investors who want guaranteed returns without worrying about market fluctuations. With simple documentation, assured returns, and government safety, NSC offers a reliable path toward disciplined, long-term savings.

In this guide, we’ll explain what NSC is, its features, benefits, interest rates, and tax savings, and how you can easily invest in it today.

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What is the National Savings Certificate (NSC)?

The National Savings Certificate (NSC) is a government-backed fixed-income investment scheme that lets you earn guaranteed returns over a fixed period. You can invest in it easily through any Post Office or selected banks.

In simple terms, when you buy an NSC, you’re lending your money to the Government of India for a set duration — currently 5 years under the NSC (VIII Issue). In return, the government pays you a fixed interest rate, which is compounded annually and paid out at maturity.

Because it’s backed by the Government of India, the NSC is one of the safest investment options available. It’s especially popular among investors who want to save tax under Section 80C while earning steady, risk-free returns.

The interest rate is reviewed every quarter by the Ministry of Finance, ensuring it stays aligned with prevailing market conditions while maintaining safety and stability.

Key Features & Benefits of NSC

1. Guaranteed Returns with Government Security

The biggest strength of the National Savings Certificate (NSC) is its government-backed assurance. Both your invested amount (principal) and the interest earned are completely guaranteed by the Government of India. This makes NSC one of the safest savings options, ideal for those who want to protect their capital while earning steady growth. Even during uncertain market conditions, your NSC returns remain unaffected, giving you peace of mind and financial stability.

2. Attractive Fixed Interest Rate

The current NSC interest rate (for the quarter October – December 2025) is 7.7% per annum, compounded annually and paid out at maturity. Since the interest is compounded, you earn returns not only on your principal but also on the accumulated interest every year helping your investment grow faster. The interest rate is set by the Ministry of Finance and revised every quarter, ensuring it stays fair and competitive compared to other fixed-income instruments.

3. Tax Savings under Section 80C

Investing in NSC also helps you save tax. The amount you invest up to ₹1.5 lakh per financial year qualifies for deduction under Section 80C of the Income Tax Act. Additionally, the annual interest that gets added (reinvested) is also eligible for tax deduction in subsequent years. This dual benefit makes NSC a powerful tax-saving tool while you continue earning guaranteed returns on your investment.

4. Affordable and Flexible Investment Option

You don’t need a large amount to get started. The minimum investment in NSC is ₹1,000, and you can invest further in multiples of ₹100. There’s no maximum limit on how much you can invest, though the tax deduction benefit applies only to the first ₹1.5 lakh each year. This flexibility makes NSC suitable for both small savers and those who prefer stable, large-scale investments in fixed-return products.

5. Loan Facility Against NSC

One of the lesser-known benefits of NSC is that it can be used as collateral to secure loans from banks and NBFCs. This means if you need funds during an emergency, you don’t have to break your investment you can simply pledge your NSC certificate to get a loan. The process is simple and accepted by most major banks, making NSC a useful financial instrument in times of need.

6. Easy to Buy and Operate

You can purchase NSC easily from any Post Office branch across India, and now also through select banks and digital channels. The process is straightforward, with minimal documentation, making it accessible even to first-time investors. Once invested, you can track your certificate through your post office passbook or electronic account, depending on the mode of investment.

7. Nomination and Transfer Facility

The NSC offers a nomination facility, allowing you to name a family member or any individual to receive the maturity amount in case of your demise. You can also transfer your certificate to another person if required, such as in case of a gift or family settlement. This makes NSC a flexible and family-friendly investment option that ensures your savings benefit your loved ones.

8. No TDS on Interest

Another advantage of NSC is that there is no Tax Deducted at Source (TDS) on the interest earned. This means the post office does not deduct any tax when your certificate matures. However, the interest is still taxable income, so it must be declared in your Income Tax Return. This feature gives you better control over your tax planning, especially if you fall in a lower tax bracket.

NSC Withdrawal Rules (Lock-in & Maturity)

The National Savings Certificate (NSC) is designed to promote disciplined long-term savings, which is why it comes with a lock-in period of 5 years. Once you invest, your money stays locked for the entire term, and you receive your principal plus the total accumulated interest only after maturity. The maturity amount is credited to your linked savings account or can be withdrawn from the post office where you purchased the certificate.

In most cases, premature withdrawal is not permitted. The idea behind this rule is to encourage consistent savings and allow your investment to grow through compounding. However, there are a few specific and exceptional situations where early encashment is allowed.

These include:

• Death of the investor: If the holder passes away before maturity, the nominee or legal heir can withdraw the investment before the 5-year term ends.
• Court order: If directed by a court of law, the post office or bank can allow premature withdrawal of the NSC.
• Forfeiture by a pledgee: In cases where the NSC has been pledged as collateral to a bank or a government officer (Gazetted rank), the pledgee may be allowed to encash it before maturity under forfeiture rules.

Apart from these conditions, no other form of early withdrawal is permitted. So, before investing, ensure that the amount you put into NSC is not part of your short-term funds or emergency savings. This will help you enjoy the full benefit of guaranteed, compounded returns at the end of 5 years without liquidity issues.

Who Should Invest in NSC?

The National Savings Certificate (NSC) is best suited for individuals who prefer stability, safety, and simplicity in their investments. It’s a great choice for anyone who wants to save tax, earn steady returns, and avoid market risks.

Here’s a closer look at who should consider investing in NSC:

1. Tax Savers

If you’re a salaried employee or self-employed individual looking for a reliable way to claim deductions under Section 80C, NSC is an excellent choice. You can invest up to ₹1.5 lakh each year and get tax benefits while earning fixed interest on your savings. It’s especially useful for those who’ve already exhausted options like EPF or life insurance and want an additional 80C avenue.

2. Risk-Averse Investors

For people who value security over high returns, NSC is ideal. It is fully backed by the Government of India, which means your principal and interest are completely safe. Unlike market-linked investments such as equity funds or shares, NSC returns are fixed and unaffected by market fluctuations, making it perfect for those who don’t want to take risks with their money.

3. Conservative and Traditional Investors

If you generally invest in Fixed Deposits (FDs) or Recurring Deposits (RDs), the NSC is a great alternative. It offers similar fixed returns but comes with the added advantage of tax savings under Section 80C. Since it is issued by India Post, it’s widely trusted among conservative investors who prefer government-backed schemes.

4. Beginners in Investing

If you’re new to investing, NSC is one of the easiest financial products to start with. It requires minimal paperwork, a small initial investment (starting from ₹1,000), and gives guaranteed returns. This makes it a good first step for young professionals and students who are beginning their savings journey.

Motilal Oswal View:

While the NSC is a safe and steady investment, it’s important to remember that it won’t deliver inflation-beating or high-growth returns. For long-term wealth creation, investors should balance their portfolio by including growth-oriented assets like equities and mutual funds. At Motilal Oswal, we recommend using NSC for the secure, fixed-income part of your portfolio, while letting stocks and equity mutual funds drive your wealth growth over time.

Eligibility Criteria for NSC

The National Savings Certificate (NSC) is designed to be a simple and accessible investment option for Indian citizens. The eligibility rules are straightforward, ensuring that almost anyone can participate in this safe, government-backed savings scheme.

Here’s a clear breakdown:

 Who Can Invest in NSC:

• Resident Individuals: Any adult who is a resident of India can invest in the NSC in their own name.
• Joint Account Holders: You can also open a joint NSC account with up to three adults, where the certificate can be held jointly and the proceeds are shared as per the agreed arrangement (either jointly or on a survivor basis).
• Parents or Guardians for Minors: An adult can invest on behalf of a minor, making NSC a great way for parents to start long-term savings for their children’s education or future needs.

Who Cannot Invest in NSC:

• Non-Resident Indians (NRIs): NRIs are not allowed to invest in NSC. If a resident investor later becomes an NRIduring the tenure, they can hold the existing certificate until maturity but cannot make fresh investments.
• Hindu Undivided Families (HUFs): HUFsare not eligible to purchase NSC under standard rules.
• Trusts, Companies, and Institutions: These entities are also not permitted to invest in NSC, as the scheme is meant purely for individual savings and not for institutional or commercial investment.

In short, NSC is a personal savings instrument created to help Indian residents build secure, long-term wealth. Before investing, always ensure your eligibility status and investment purpose align with the scheme’s guidelines to avoid any complications later.

How to Invest in NSC (Step-by-Step)

You can purchase the National Savings Certificate (NSC) in either e-mode (electronic form) or passbook mode (physical record). The process is simple and can be done through a Post Office or select designated banks.

Here’s a clear step-by-step guide:

Step 1: Open or Hold a Savings Account

• You must have an active savings account with either a designated bank or the Post Office.
• This account will be linked to your NSC investment for interest and maturity proceeds.

Step 2: Activate Internet Banking (Optional for e-Mode)

• If you prefer to buy NSC online, ensure internet banking is activated.
• Many banks and India Post now allow online NSC purchases through their net banking or post office portals (e.g., India Post eBanking).

Step 3: Access the NSC Purchase Section

• Log in to your bank or Post Office portal, or visit your nearest Post Office branch.
• Navigate to the National Savings Certificate (VIII Issue) purchase section.

Step 4: Enter Investment Details and Make Payment

• Enter the amount you wish to invest (in multiples of ₹1,000; minimum ₹1,000).
• Choose the mode of payment debit card, cheque, UPI, or net banking (as per the service channel).
• Complete the transaction as per on-screen or counter instructions.

Step 5: Receive Your Certificate

• Once payment is successful, you’ll receive either:

  • An e-certificate (for e-mode investments), or
  • A physical passbook entry (for offline/post office investments).

Keep this certificate/passbook entry safe it’s your proof of investment and will be required at the time of maturity or redemption.

Documents Required to Apply for NSC

To invest in a National Savings Certificate (NSC), you need to complete standard KYC (Know Your Customer) formalities.

Keep the following documents ready before applying:

1. NSC Application Form

• Obtain and fill out the NSC (VIII Issue) application form from the Post Office or bank.
• Ensure all details (name, address, nominee, amount) are correctly filled and signed.

2. Identity Proof (any one)

• Aadhaar Card
• PAN Card
• Voter ID
• Passport
• Driving Licence

3. Address Proof (any one)

• Aadhaar Card
• Passport
• Driving Licence
• Recent utility bill (electricity, telephone, water, or gas bill)

4. PAN Card

• Mandatory for all NSC investments.
• Especially required for investments above prescribed limits as per government rules.

5. Passport-size Photograph

• A recent passport-size photo of the investor.

6. Bank / Post Office Account Details

• For e-mode investments, you must link an active savings account for payment and maturity credit.

NSC Tax Benefits Explained

1. Tax Deduction on Investment (Section 80C):

The amount you invest in the National Savings Certificate (NSC) each financial year is eligible for a tax deduction under Section 80C of the Income Tax Act. You can claim up to ₹1.5 lakh in deductions, which directly reduces your taxable income and helps lower your overall tax liability. This makes NSC an excellent choice for salaried individuals and taxpayers looking for a safe, government-backed investment that also provides tax savings. Even small, consistent investments through NSC can lead to meaningful long-term savings while keeping your capital completely secure.

2. Tax on Interest (Reinvestment Benefit):

The interest earned on NSC is taxable, but there’s a valuable benefit built in the interest generated each year (except in the final year) is automatically reinvested back into your NSC account. This reinvested amount is treated as a new investment, which means it also qualifies for an additional Section 80C deduction (within the ₹1.5 lakh annual limit). This feature allows your money to compound over time while continuing to reduce your taxable income each year. It’s a simple yet effective way to make your investment both tax-efficient and growth-oriented.

3. Tax at Maturity:

When your NSC matures after 5 years, you receive your principal along with the accumulated interest. Only the interest earned in the final year is taxable according to your income tax slab, as it is not reinvested. There is no TDS (Tax Deducted at Source) on NSC maturity, but you must declare this interest in your income tax return. Investors often reinvest the maturity amount into a new NSC or diversify into instruments like mutual funds or equities to continue building wealth. Overall, NSC combines guaranteed returns with meaningful tax efficiency, making it one of the best options for long-term, risk-free savings.

What to Do If You Lose or Damage Your NSC Certificate

If your National Savings Certificate (NSC) is lost, stolen, or damaged, there’s no need to panic  your investment remains completely safe since it is recorded with the issuing Post Office. You can easily apply for a duplicate certificate by following a few simple steps.

First, visit the Post Office where the NSC was originally purchased and fill out Form NC-29 (Application for Issue of Duplicate Savings Certificate). You’ll need to provide key details such as the certificate number, date of issue, and investment amount to help locate your record. Additionally, carry valid proof of identity like Aadhaar or PAN for verification.

If the certificate was lost or stolen, you may also be asked to submit a police FIR or a notarized affidavit explaining the loss. The Post Office will then verify the information and issue a duplicate certificate after completing the required checks. This process ensures that even if the physical document is misplaced or damaged, your investment and accrued interest remain protected and retrievable.

Conclusion

The National Savings Certificate (NSC) is one of the simplest and safest investment options available to Indian investors today. Backed by the Government of India, it guarantees fixed returns and provides valuable Section 80C tax benefits, making it ideal for anyone who prioritizes capital protection and steady growth. With an attractive interest rate of 7.7%, a five-year lock-in, and an easy application process through Post Offices or designated banks, NSC remains a dependable choice for both new and experienced investors.

However, while NSC takes care of the secure, fixed-income part of your financial plan, true wealth creation happens when you combine safety with growth. Diversifying your investments across asset classes  such as equities, mutual funds, and tax-saving instruments can help you achieve better long-term results and outpace inflation.

Motilal Oswal’s expert research team can help you design a well-balanced portfolio that complements your NSC investments with high-quality stocks and mutual funds tailored to your goals and risk appetite.