Tax Savings

How National Savings Certificates can Help in Tax Benefits & Eligibility


The National Savings Certificate (NSC) is a fixed-rate savings instrument that can be held with any public bank in India. It offers interest rates of 6.8% per annum currently. There is no minimum or maximum investment amount for NSC. While you can open your NSC account, there are also many schemes out there which offer higher interest rates.

Who is eligible to apply for an NSC?

NSC can be opened by any citizen of India. However, the rules for opening an NSC account may vary from person to person. You should check whether you qualify for an NSC account or not before applying for one.

If you are a resident:

  • You must have had an annual income of less than Rs 1 lakh (or the equivalent amount in foreign currency) per annum during the last 3 years. But the income should not be more than Rs 10 lakhs in total at any point of time over 5 years preceding your application date.
  • Your assets should not exceed Rs 50 lakhs at any point of time over the 5 years preceding your application date. This includes cash held with banks/financial institutions.

When can NSC be bought?

NSC can be bought by individuals, HUFs, firms (including co-operative societies), trusts and educational institutions.

NSC can be purchased on the first day of every month for the current calendar year. You can also open an NSC account before that date. In this case, you should use your previous month’s balance as a base for calculating interest for the next month. If you do not have any money in your account then you will get a refund from the bank. This refund will be processed after deducting Rs. 10 from every Rs. 100 deposited in it. This will be done until the time they are fully used for NCRS tickets etc.

How much can you invest in your NSC account?

The maximum amount that can be invested in an NSC online account is Rs. 1.5 lakhs per financial year. However, if you are married or have children, the limit will grow to Rs. 2 lakhs per year.

You can also open a joint account with your spouse. Here both of you will contribute towards it and manage the assets jointly. But only one person needs to invest his/her entire contribution of Rs 1.5 lakhs into this account (i.e., not partial contributions).

How many accounts can you open?

You can open multiple accounts. For example, you could have a savings account and an investment account with the same bank.

  • You can also open an additional account for your child if they are over 18 years old.
  • If you’re married or in a civil partnership, it’s possible to open another NSC-eligible savings or investment product under both names. This will be subject to the same eligibility criteria.

What is the interest rate on NSC?

The interest rate on NSC is decided by the government. The interest rate is subject to change every quarter. The amount of interest credited to your account varies depending on how much you have in your account at any given time. At present 6.8% return is being provided.

The daily calculation of interest rates is done by an algorithm that takes into account several factors including: –

  • Your balance as at the end of each day;
  • The prevailing market rate for treasury bills; and
  • Other variables such as inflation and GDP growth (if applicable).Are there any tax benefits with regard to National Savings Certificate (NSC)?
  • You can claim a tax deduction on the interest earned on an NSC account up to a maximum of Rs 1 lakh per year.
  • You can also claim a tax deduction on the maturity value of your NSC account at any time during its lifetime; this will be added to your income and taxed accordingly.

Important points to remember about NSC

These are some extremely important points along with all the other points discussed to remember about NSC: –

  • The National Savings Certificate (NSC) is a savings account that can be used for short-term financial needs. It has a 6.8% interest rate, which is higher than the nationalised banks’ fixed deposit rates.
  • The NSC account is available to residents of India who have an Aadhaar card and can open an account with any bank or post office branch in India. You also need to be at least 18 years old to open an NSC account with Public Limited Company Bank Ltd., State Bank of Travancore Ltd., State Bank of Patiala Ltd., Punjab National Bank Ltd., and Oriental Bank Of Commerce Pte Ltd.
  • If you leave your NSC account uninvested, the interest will remain in your account until it matures. If you don’t repay the entire amount by maturity or otherwise, the remaining amount will be paid out to you.
  • If you choose not to reinvest or spread out any dividends from an NCR bond, then no interest will be earned on these bonds until they mature and are repaid in full.

NSC for long-term goals

Investing in a national saving certificate (NSC) is a good way to save for your long-term goals. NSCs are low-risk investments with tax-free interest. It’s not just limited to one account like an endowment savings scheme or unit trust. You can open multiple NSC accounts and earn interest on them, which makes it easier to track your savings over time.

When you invest in an NSC, the interest is paid out as regular income each year. So, if you have been investing for five years and withdrew all your funds before they matured then there would be no capital gains tax due! This means that even if the value of your investment increases during its term there will still be no capital gains tax payable when withdrawing from the scheme at maturity!


National saving certificates are a great way to save for your future. You can hold on to them for as long as you like and the interest earned on them is exempt from income tax. You do need to keep a minimum balance of Rs 1,500 in your NSC account at all times or else it will be automatically debited by the bank. One can use various NSC calculators twitch is present online to understand the returns that they will get after a period of 5 or 10 years.

To learn more about different financial topics like NSC, see the blogs on Piramal Finance that will help you know about each of these topics thoroughly.