NSC: the post office's five-year sure thing

Open the old files in a grandfather’s cupboard and in many homes you’ll find the same thing — a post office NSC. The National Savings Certificate. For decades, middle-class families have kept money in it. The reason is simple: a government guarantee, a known rate, and a known amount after five years.

The NSC is still here today — only now the certificate is electronic instead of paper.

The basics

• Interest: 7.7% a year for October–December 2026. It has not changed since April 2023.
• Term: exactly 5 years.
• Deposit: at least ₹1,000, then in multiples of ₹100. No upper limit. You can buy as many certificates as you like.
• Where: only at the post office. Banks don’t sell it.

The big advantage: the rate is locked

Buy an NSC at 7.7% today and that certificate earns 7.7% for all five years. If the government cuts the rate later, your NSC is not affected.

That is different from Sukanya Samriddhi and PPF, where a rate change applies to the whole balance. An NSC works more like an FD: what you get on the day you buy is what you get to the end.

How the money grows

Interest is added once a year, but it is not paid out — the whole amount comes in one go after five years. Each year’s interest earns interest the next year.

Take a ₹10,000 NSC:

• Year 1 interest: ₹770
• Year 2: ₹829
• Year 3: ₹893
• Year 4: ₹962
• Year 5: ₹1,036
• You get back after 5 years: ₹14,490

In the same way, ₹1 lakh becomes about ₹1.45 lakh in five years.

Who can buy one

• Any Indian adult, in their own name.
• Up to three adults jointly.
• A guardian on behalf of a child. A child over 10 can hold one in their own name.
• NRIs cannot buy a new NSC. If you become an NRI after buying, you can hold it until maturity.

Always name a nominee. Without one, your family has to produce affidavits and indemnity bonds to claim the money — and a court succession certificate if it’s over ₹5 lakh.

Tax: pay attention here

• Deduction on the deposit: in the old tax regime, within the ₹1.5 lakh yearly limit. This was Section 80C; from 1 April 2026, under the new Income-tax Act, it is Section 123. The limit is shared with PPF, ELSS, insurance premiums and the rest.
• The interest is taxable. Unlike SSY, it is not tax-free. It is added to your income and taxed at your slab.
• One clever rule: the interest for the first four years is treated as “reinvested”. So in the old regime, you can show that interest as income each year and claim the same amount back as a deduction — meaning that interest is effectively not taxed. Only the fifth year’s interest is.
• No TDS is deducted. So showing the interest in your ITR is your job. Forget, and a tax notice can arrive later.

In the new tax regime there is no deduction on the deposit, and all the interest is taxed. Then compare the NSC as you would an ordinary five-year FD.

What if you need the money early?

This is the NSC’s biggest drawback. You cannot cash it before five years — except for three reasons:

• The death of the holder (any one holder, in a joint certificate)
• A court order
• If you pledged it for a loan and the lender (a bank) takes it

Even then, closing within the first year returns only your deposit, no interest. Between one and three years, you get the lower post office savings account rate.

So don’t put money in an NSC that you might need in the next five years. Keep a separate emergency fund for sudden needs.

There is one way round it: you can pledge the NSC to a bank for a loan. A loan instead of breaking it — but you pay interest on the loan.

How to buy

• Fill in the form at your nearest post office. You’ll need Aadhaar and PAN (KYC) and a photo.
• If you have a post office savings account, you can also buy from home through India Post net banking.
• Certificates are now electronic — you get a passbook or an e-certificate.

At maturity: collect the money from the post office once five years are up. Left lying there after maturity, it no longer earns the NSC’s 7.7% — the money just sits. If you don’t need it, buy a fresh NSC at that day’s rate.

Who it suits

A good fit if you:

• Have a known goal five years away — a child’s college admission, a house repair.
• Don’t want market ups and downs, and want the rate locked for five years.
• Are in the old tax regime and want to fill the ₹1.5 lakh deduction.

Think twice if you:

• Are in a high tax slab — after tax, the real return is well below 7.7%.
• Might need the money within five years.
• Have a goal 10–15 years away — look at other options too, to stay ahead of rising prices.

The NSC isn’t flashy. But where certainty is what you need, it quietly does its job — just as it did in grandfather’s cupboard.

Sources: National Savings Certificates (VIII Issue) Scheme, 2019 (Government of India Gazette), and the Ministry of Finance interest rate announcement for October–December 2026. Last checked: 23 October 2026.

This letter is for education only. It is not investment advice. Markets go up and down. Decide from your own goals, time, and how much risk you can live with.