The 80C deduction most NSC buyers miss
Every March, lots of people buy an NSC at the Post Office to finish their 80C, claim the deposit and then forget about it for five years. The part they miss is the interest. NSC pays nothing until maturity, but the interest of years 1 to 4 is treated as reinvested in the certificate. In the old regime that interest can be claimed under 80C too, within the same ₹1.5 lakh limit.
Take ₹1 lakh at the current 7.7%. After 5 years it becomes about ₹1,44,903, so ₹44,903 is interest. Of that, about ₹34,544 belongs to years 1 to 4 and counts for 80C.
How the money grows
Interest is added once a year on the growing value, so every year earns a little more than the one before. On ₹1 lakh that is ₹7,700 in year 1, ₹8,293 in year 2, ₹8,931 in year 3 and ₹9,619 in year 4. Year 5 adds ₹10,360, which is paid out with the rest and is not reinvested.
Maturity = amount × (1 + rate ÷ 100)5
Each year’s interest is also your income for that year, taxed at your slab rate. If you still have room under ₹1.5 lakh, the income and the 80C claim cancel out for years 1 to 4. Only the 5th year’s interest is really taxed.
Old regime or new
There is no 80C in the new regime. There, NSC is just a 5-year deposit with a fixed 7.7% and taxable interest, so compare it with a 5-year FD before you lock in. In the old regime it is an easy way to fill the last bit of 80C without any market risk. Not sure which regime suits you? Run your salary through the income tax calculator first.
NSC rules at a glance
| Interest rate | 7.7% a year (October to December 2026), reviewed every quarter. The rate on the day you buy stays for all 5 years |
|---|---|
| Tenure | 5 years, interest compounded yearly and paid at maturity |
| Amount | Minimum ₹1,000, no upper limit |
| 80C (old regime) | The investment plus the interest of years 1 to 4, within ₹1.5 lakh |
| Tax on interest | At your slab rate |
| Early closure | Only in a few cases, such as the holder’s death or a court order |
Frequently asked questions
What is the NSC interest rate now?
7.7% a year for October to December 2026, compounded yearly and paid at maturity. The government reviews it every quarter, but the rate on the day you buy stays fixed for the certificate’s full 5 years.
How much will ₹1 lakh in NSC become after 5 years?
At 7.7%, about ₹1,44,903. That is ₹44,903 of interest on your ₹1 lakh, all paid together at maturity. So the money grows about 1.45 times in 5 years.
Is NSC interest taxable?
Yes, at your slab rate. In the old regime, the interest of years 1 to 4 counts as reinvested, so it can also be claimed under 80C within the ₹1.5 lakh limit. The 5th year’s interest gets no such deduction.
Does NSC give any tax benefit in the new regime?
No. Section 80C is only in the old regime. In the new regime NSC is simply a 5-year deposit at a fixed 7.7%, and the interest is taxed at your slab rate like any other income.
Can I withdraw NSC before 5 years?
Generally no. NSC pays out only at maturity. Early closure is allowed only in a few cases, such as the holder’s death or a court order, so put in only money you won’t need for 5 years.
Calculator maintained by Manoj. Last reviewed: 19-10-2026. Rates and rules are checked against official sources. Tell us if something has changed. Contact
