Work out what a National Savings Certificate pays after five years, with yearly compounding and the interest that qualifies for a fresh 80C claim.
What is the 80C trick with NSC?
The interest added in years one to four is treated as reinvested in the certificate, so under the old regime you can claim it under section 80C again in each of those years, on top of the original deposit. Only the fifth year’s interest is plainly taxable, because it is paid out to you.
When do I get the money?
All of it at the end of five years. NSC pays nothing along the way, unlike SCSS or the post office MIS. If you need a regular income, this is the wrong scheme.
Does the rate change during the five years?
No. The rate is fixed when you buy the certificate and stays fixed for its whole term. Later quarterly revisions apply only to new certificates.
Is there a maximum investment?
No upper limit. Certificates are issued in multiples of ₹100 with a ₹1,000 minimum. Only the first ₹1,50,000 counts for 80C, and that limit is shared with PPF, EPF, life insurance, and everything else in the section.
Can I break it early?
Only in narrow cases: the holder’s death, forfeiture by a pledgee who is a Gazetted officer, or a court order. Otherwise the money is locked for the full five years. An NSC can, however, be pledged as security for a loan.
NSC or a tax saving FD?
Both lock money for five years and both qualify for 80C. NSC usually pays a higher rate, is government backed, and lets you re-claim the reinvested interest. A bank FD is easier to open and can be held with a bank you already use.