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Calculate the exact 5-year maturity value of your NSC. Uncover the hidden tax hack where the reinvested interest qualifies for fresh Section 80C deductions every year.
Fixed by the Govt of India quarterly. Currently guaranteed at 7.7% for the entire 5-year tenure.
NSC enforces a strict 5-year lock-in period with annual compounding.
Maturity Amount
₹2,17,355
Guaranteed payout at 5 Years
Interest Earned
₹67,355
44.9% absolute return
Principal Amount
₹1,50,000
Eligible for 80C deduction
Compound Rate
7.7
Annual interest
Unlike FDs, NSC interest is reinvested annually. Notice how the "Yearly Interest Accrued" can be claimed as an 80C deduction in Years 1 to 4!
| Year | Principal + Previous Int. | Yearly Interest Accrued |
|---|---|---|
| Year 1 | ₹1,50,000 | +₹11,550 |
| Year 2 | ₹1,61,550 | +₹12,439 |
| Year 3 | ₹1,73,989 | +₹13,398 |
| Year 4 | ₹1,87,387 | +₹14,428 |
| Year 5 | ₹2,01,815 | +₹15,540 |
NSC undergoes standard annual compounding, meaning interest is calculated and added to the principal once a year.
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Book Free ConsultationThe unassuming tax-saver available at your local post office. While most investors flock to ELSS and PPF, savvy taxpayers use NSC to plug gaps in their 80C limits without triggering TDS deductions.
When you invest in a Tax-Saving Bank FD, the interest earned every year is added to your income and taxed. NSC operates differently:
The initial lump sum you invest to buy the NSC immediately qualifies for a tax deduction under Section 80C up to ₹1.5 Lakhs in the year of purchase.
The interest accrued annually is not paid out; it is automatically 'reinvested'. Because it is reinvested, the Income Tax Act treats it as a fresh investment, allowing you to claim that interest amount as an 80C deduction again in years 1, 2, 3, and 4!
In the 5th and final year, the interest is paid out alongside the maturity amount. Since it is paid out and not reinvested, the 5th-year interest is fully taxable according to your income slab.
Governing Law: National Savings Certificate (VIII Issue) Rules, 1989 under the Government Savings Certificates Act, 1959.
TDS: Unlike FDs and RDs, no TDS is deducted on NSC interest. However, the accrued interest must be reported in your ITR annually.
Disclaimer: NSC interest rate (currently 7.7%) is revised quarterly by the Ministry of Finance. The 80C reinvestment hack is based on current tax law interpretation. Consult a CA for personalized advice.
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