Interest Applicability on Premature Withdrawal of NSC
| Premature Withdrawal Period | Interest Rate Deduction |
| Before 1 year | No interest paid |
| After completion of 1 year | Interest offered at the rate applicable then. |
Premature closure of NSC is generally not allowed before 5 years, except under the following circumstances:
- In the event of the death of a single account holder or any or all account holders in a joint account.
- If forfeited by a pledgee who is a Gazetted officer.
- On court orders.
Also read: FD Vs NSC
History of National Savings Certificate Interest Rates
The interest rates for National Savings Certificate are subject to periodic review by the Ministry of Finance, resulting in quarterly adjustments. While the interest on NSCs is compounded annually, it is paid out only upon maturity. For a historical perspective, you can refer to the chart below, which illustrates the NSC interest rates from previous years:
| Year | Quarter 1 | Quarter 2 | Quarter 3 | Quarter 4 |
| 2024-2025 | 7.7 | 7.7 | 7.7 | 7.7 |
| 2022 - 2023 | 6.8 | 6.8 | 6.8 | 7 |
| 2021- 2022 | 6.8 | 6.8 | 6.8 | 6.8 |
| 2020- 2021 | 6.8 | 6.8 | 6.8 | 6.8 |
| 2019 - 2020 | 8 | 7.9 | 7.9 | 7.9 |
| 2018 - 2019 | 7.6 | 7.6 | 8 | 8 |
| 2017- 2018 | 7.9 | 7.8 | 7.8 | 7.6 |
| 2016 - 2017 | 8.1 | 8.1 | 8 | 8 |
Benefits of NSC
Investing in NSC comes with several advantages, making it an attractive option for individuals looking to grow their savings:
- Attractive Interest Rate: NSC offers a competitive interest rate that is higher than many other savings schemes.
- Safety and Security: Being a government-backed scheme, NSC is one of the safest investment options.
- Tax Benefits: The invested amount qualifies for a deduction under Section 80C of the Income Tax Act, reducing your taxable income.
- No Maximum Investment Limit: You can invest any amount without any upper limit.
- Easy Liquidity: NSC certificates can be encashed at any post office.
Eligibility criteria for NSC
The eligibility criteria for investing in National Savings Certificate (NSC) typically include:
- A single adult can open a NSC account.
- Joint accounts allow up to three adults. They can collectively manage the account and benefit from the scheme.
- Guardians can open accounts on behalf of minors or individuals of unsound mind. The guardian oversees the account until the minor reaches maturity or the individual’s condition improves.
- Minors aged above 10 years can open their account on his or her name.
- Hindu Undivided Families (HUFs), Trusts, Private and Public Limited Companies (PLCs) cannot open a NSC account.
- Non-Resident Indians (NRIs) cannot open a NSC account.
Application Procedure for NSC
To invest in NSC, follow these simple steps
- Visit the nearest post office.
- Obtain an NSC application form.
- Fill in the required details, such as the nominee's name, amount to be invested, and personal information.
- Submit the completed form, along with the necessary documents and the investment amount.
- The post office will issue you an NSC certificate.
Document Requirements for NSC
To invest in NSC, you need to provide the necessary documents:
- Identity proof (Aadhar card, passport, voter ID, etc.).
- Address proof (electricity bill, passport, etc.).
- Passport-sized photographs.
Tax Implications of National Savings Certificate
Here are the tax implications of investing in NSC:
- NSCs serve as tax-saving investments, allowing a deduction under Section 80C for the invested principal, up to the Rs. 1.5 lakh limit.
- The annual interest earned on NSCs is treated differently for tax purposes. Interest earned in the first four years is deemed reinvested, exempt from tax, and eligible for an deduction under Section 80C (within the Rs 1.5 lakh overall annual limit).
- However, the interest earned in the 5th year is not reinvested and is taxable based on the investor's applicable slab rate.
Also read: Post Office Double Money Scheme
How to Invest in NSC Online
- Log in to DOP internet banking.
- Navigate to "Service Requests" under "General Services" and select "New Requests."
- Choose "NSC Account – Open an NSC Account (For NSC)."
- Enter the minimum NSC deposit and enter your debit account that is linked with your Post Office saving account.
- Click on "Click Here" to see terms & condition, accept it, then submit the application online.
- Enter your transaction password, click "Submit”.
