The National Savings Certificate (NSC) interest rate for the October-December 2026 quarter has been announced at 7.7%. This rate will remain fixed for the full five-year term of the certificate, providing a reliable return for investors.
- The NSC interest rate is 7.7% for the tenth consecutive quarter.
- Every ₹10,000 invested grows to ₹14,490 at maturity.
- A ₹1 lakh certificate can grow to about ₹1.45 lakh in five years.
- Interest compounds annually and is paid at maturity.
- Investments qualify for tax deduction under Section 80C up to ₹1.5 lakh.
What is the National Savings Certificate (NSC)?
The NSC is a government-backed savings scheme designed to encourage small savings. The current NSC (VIIIth issue) has a five-year maturity period. Investors can start with a minimum investment of ₹1,000, and there is no upper limit on the amount invested.
Interest on the NSC compounds annually but is paid only at maturity. This means the interest earned each year is added to the principal for calculating interest in the following years, leading to higher returns over time.
How does the 7.7% interest rate affect returns?
At the 7.7% interest rate, the returns on NSC investments are predictable and steady. For example, an investment of ₹10,000 will mature to ₹14,490 after five years. Similarly, a ₹1 lakh investment will grow to approximately ₹1.45 lakh, and ₹5 lakh will grow to about ₹7.25 lakh.
Are there tax benefits with NSC investments?
Yes, NSC investments qualify for a tax deduction under Section 80C of the Income Tax Act, up to a limit of ₹1.5 lakh per financial year. Additionally, the interest earned during the first four years is considered reinvested and also qualifies for the 80C deduction. However, the interest income is taxable at the investor's applicable slab rate.
It is important to note that these tax benefits are available only under the old tax regime.
How is the NSC interest rate determined?
The NSC interest rate is linked to government securities. According to the Shyamala Gopinath Committee framework, the five-year NSC rate is benchmarked to the five-year government security (G-sec) yield plus a 25-basis-point spread. For the July-September quarter, the average five-year G-sec yield was about 6.5%, which implies a formula-based rate of approximately 6.75%. However, the actual NSC rate is set at 7.7%, higher than the benchmark.
Is the NSC rate fixed for the entire term?
Yes, the interest rate on the NSC is locked in at the time of purchase and remains fixed for the full five-year term. This means that certificates bought during the October-December 2026 quarter will earn 7.7% interest regardless of any future changes in rates.
How does NSC compare with other fixed income options?
The NSC offers a higher interest rate compared to other fixed income instruments such as the five-year post office time deposit and bank fixed deposits. The five-year post office time deposit pays about 0.2 percentage points less than NSC, while bank fixed deposits typically offer even lower rates. This makes NSC a competitive option for conservative investors seeking steady returns.
