If you’re looking for a safe investment backed by the government, the National Savings Certificate (NSC) is one option worth considering.
It is a popular small savings scheme that offers guaranteed returns and is especially suitable for conservative investors.
At a time when stock markets can be unpredictable and bank fixed deposit rates may not always be attractive, NSC continues to draw investors with its fixed interest rate and government guarantee.
Current NSC Interest Rate
The National Savings Certificate currently offers an interest rate of 7.7% per year.
One of the biggest advantages of NSC is that the interest rate remains fixed for the entire investment period.
This means investors know in advance how much money they will receive when the investment matures after five years.
How Much Will ₹1 Lakh Become After 5 Years?
A ₹1 lakh investment in NSC can grow significantly over five years thanks to annual compounding.
Here’s how the calculation works:
Investment Amount: ₹1,00,000
Interest Rate: 7.7% per year
Investment Period: 5 years
Maturity Value: ₹1,44,903
Total Interest Earned: ₹44,903
Since the interest is compounded annually and paid at maturity, investors receive both the principal amount and accumulated interest at the end of five years.
Tax Benefits Available Under NSC
NSC also offers tax-saving benefits.
Investments made in NSC qualify for a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act.
However, this benefit is available only to taxpayers who choose the old tax regime.
Investors opting for the new tax regime cannot claim this deduction.
Can an NSC Account Be Transferred?
Yes, an NSC account can be transferred in certain situations.
The account can be transferred to a nominee or legal heir in case of the account holder’s death.
In a joint account, the transfer can be made to the surviving account holder or holders.
Transfer is also allowed under specific circumstances such as a court order or certain approved mortgage-related cases under the scheme rules.
Rules for Premature Closure of NSC
Normally, an NSC account cannot be closed before its five-year maturity period.
However, premature closure is allowed in a few special situations:
Death of the account holder in a single account.
Death of one or all account holders in a joint account.
Closure due to a court order.
Certain approved cases involving a pledged or mortgaged certificate under scheme rules.
What Happens to Interest If You Close NSC Early?
The amount you receive depends on when the account is closed.
If the account is closed within one year of opening, only the original investment amount will be returned. No interest will be paid.
If the account is closed after one year but before three years, the investor will receive the principal amount along with interest calculated at the rate applicable to a Post Office Savings Account.
Is NSC a Good Option for Investors?
For investors looking for safety, fixed returns, and tax-saving benefits, NSC remains a popular choice.
The government-backed scheme offers predictable returns and is not affected by stock market fluctuations.
With a current interest rate of 7.7%, a ₹1 lakh investment can grow to nearly ₹1.45 lakh in five years, making it a suitable option for long-term savings goals.
