National Savings Certificate: ₹1 lakh at 7.7% for 5 years = ₹1,44,903. Annual compounding. 80C deduction every year.
| Year | Opening Balance | Interest Earned | Closing Balance | 80C Deduction |
|---|
| Scheme | Rate | Tenure | 80C | Taxability |
|---|---|---|---|---|
| PPF | 7.1% | 15 years | Yes | EEE (fully tax-free) |
| NSC | 7.7% | 5 years | Yes | Interest taxable |
| SSY (Daughter) | 8.2% | 21 years | Yes | EEE (fully tax-free) |
| SCSS (Senior) | 8.2% | 5 years | Yes | Interest taxable |
| Post Office TD (5yr) | 7.5% | 5 years | Yes | Interest taxable |
| KVP | 7.5% | 115 months | No | Taxable |
National Savings Certificate (NSC) is a government-backed savings scheme with 7.7% interest rate (April 2026), the highest among major government savings schemes. NSC has a 5-year lock-in, making it ideal for medium-term tax saving. Unlike PPF which has 15-year lock-in, NSC gives you your money back in just 5 years. Minimum investment: ₹1,000. No maximum limit. Available at all 1.5 lakh+ post offices and major banks across India.
NSC interest is compounded annually but paid only at maturity — you don't receive interest payments each year. The interest accrued in years 1-4 is deemed reinvested in NSC, which means it also qualifies for Section 80C deduction each year! This dual tax benefit is unique to NSC. Only the Year 5 interest is purely taxable as "income from other sources." ₹1,50,000 invested in NSC for 5 years at 7.7%: Year 1 interest = ₹11,550, Year 2 = ₹12,440, Year 3 = ₹13,398, Year 4 = ₹14,430, Year 5 = ₹15,541. Total maturity: ₹2,17,354.
For a 5-year investment horizon: NSC at 7.7% beats SBI FD at 6.5% and even Post Office TD at 7.5% (same issuer, different scheme). PPF gives 7.1% but locks for 15 years — not comparable for 5-year need. NSC also gives 80C deduction unlike FD interest which is fully taxable. After-tax comparison for 30% bracket: NSC effective yield ≈ 6.3%, SBI FD effective yield ≈ 4.6%, Post Office TD effective yield ≈ 6.1%. NSC wins clearly on post-tax basis for medium-term investment.