The National Savings Certificate (NSC) is one of the most popular savings schemes offered by the India Post Office. It is a secure and reliable investment option backed by the government, making it an attractive choice for risk-averse investors. One of the key factors influencing investment decisions in NSC is the rate of interest. Understanding how the interest rate works and how it impacts your returns can help you make an informed financial decision.
What is the NSC Scheme?
The National Savings Certificate (NSC) is a fixed-income investment scheme available at post offices across India. It is designed to encourage small and mid-level savings while offering tax benefits under Section 80C of the Income Tax Act.
Key Features of NSC:
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Fixed interest rate revised quarterly by the government.
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Maturity period of 5 years.
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Minimum investment of ₹1,000 (no maximum limit).
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Compounded interest but paid only at maturity.
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Tax deduction up to ₹1.5 lakh under Section 80C.
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No TDS deduction on interest earned.
Rate of Interest on NSC in Post Office
The rate of interest on NSC is reviewed and updated by the government every quarter. As of 2025, the current interest rate on NSC (5-year tenure) is 7.7% per annum.
Historical Interest Rates on NSC
| Time Period | Interest Rate (%) |
|---|---|
| Q1 2025 | 7.7% |
| Q4 2024 | 7.7% |
| Q3 2024 | 7.7% |
| Q2 2024 | 7.7% |
| Q1 2024 | 7.7% |
| Q4 2023 | 7.7% |
The interest rate has remained stable in recent quarters, making NSC a consistent and reliable investment option.
How is Interest Calculated on NSC?
NSC interest is compounded annually but paid out only at maturity. This means that the interest earned each year is reinvested and earns additional interest in subsequent years.
Example Calculation
If you invest ₹1,00,000 in NSC at 7.7% interest per annum, here’s how your investment grows:
| Year | Principal + Interest (₹) |
|---|---|
| Year 1 | 1,07,700 |
| Year 2 | 1,15,994 |
| Year 3 | 1,24,925 |
| Year 4 | 1,34,522 |
| Year 5 | 1,44,825 |
At the end of 5 years, your total maturity amount will be ₹1,44,825, meaning you earn ₹44,825 as interest on your initial investment of ₹1,00,000.
Why Invest in NSC?
1. Guaranteed Returns
Since NSC is backed by the Government of India, it offers risk-free returns with guaranteed interest.
2. Higher Interest Rate
The 7.7% interest rate is higher than bank fixed deposits (FDs) and similar to other small savings schemes like PPF and KVP.
3. Tax Benefits
Investments up to ₹1.5 lakh in NSC are eligible for tax deduction under Section 80C.
4. No TDS Deduction
Unlike bank deposits, NSC interest is not subject to Tax Deducted at Source (TDS), making it a better option for tax-efficient savings.
5. Compounded Interest Growth
Since NSC follows the annual compounding method, your investment grows at a faster rate compared to simple interest options.
How to Invest in NSC at the Post Office?
Investing in NSC is simple and requires visiting your nearest post office. Here’s the step-by-step process:
Step 1: Visit the Post Office
Go to any India Post Office branch that offers NSC services.
Step 2: Fill Out the NSC Application Form
Provide your personal details, investment amount, and nominee details.
Step 3: Submit Documents
You need to submit the following KYC documents:
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Aadhaar Card or PAN Card
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Address proof (Voter ID, Passport, etc.)
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Recent passport-sized photographs
Step 4: Make the Payment
You can invest in NSC using cash, cheque, demand draft (DD), or online transfer through the India Post Payments Bank (IPPB).
Step 5: Receive Your NSC Certificate
After processing your application, the post office will issue a physical or e-NSC certificate, which you should keep safe.
Who Should Invest in NSC?
✅ Best for Salaried and Middle-Class Investors
NSC is ideal for individuals looking for safe and stable returns with tax benefits.
✅ Good for First-Time Investors
New investors who want to start long-term savings without risks can choose NSC.
✅ Ideal for Tax-Saving Goals
If you need to reduce taxable income under Section 80C, NSC is a better alternative to fixed deposits.
NSC vs Other Investment Options
| Feature | NSC | Fixed Deposit (FD) | Public Provident Fund (PPF) | Mutual Funds |
|---|---|---|---|---|
| Interest Rate | 7.7% | 6.5%-7.5% | 7.1% | Market-linked |
| Tenure | 5 years | 1-10 years | 15 years | Flexible |
| Tax Benefits | Yes (80C) | Yes (80C) | Yes (80C) | No |
| Risk Level | Very Low | Low | Very Low | High |
| TDS on Interest | No | Yes (if above ₹40,000) | No | No |
NSC is a better option than FDs in terms of interest rate, tax benefits, and TDS exemption.
Things to Keep in Mind Before Investing
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No Premature Withdrawal – NSC cannot be withdrawn before 5 years, except in cases like the investor’s death.
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Tax on Interest Earned – While NSC interest is tax-free under Section 80C, it becomes taxable if not reinvested.
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No Loan Facility – Unlike PPF or FDs, NSC cannot be used as collateral for loans.
The rate of interest on NSC in post offices makes it one of the best fixed-income investment options for risk-averse investors. With a 7.7% interest rate, tax benefits, and government-backed security, NSC is an excellent choice for those looking to grow their savings safely. Whether you are a first-time investor or a salaried individual seeking tax-saving options, NSC remains a reliable and profitable investment in 2025.