NSC Tax Calculator
What a National Savings Certificate leaves after tax, including the deemed reinvestment that claims Section 80C a second time — and the years where it does not.
What the NSC tax calculator does
An NSC tax calculator shows what a National Savings Certificate is worth after tax. Interest is taxable as it accrues, but for the first four years it is deemed reinvested and so also qualifies under Section 80C. The fifth year's interest is paid out and taxed with no relief, and the reinvestment competes for the same ₹1.5 lakh ceiling as EPF and PPF.
Your inputs
From ₹1,000. There is no ceiling on the investment — only on what may be deducted.
Compounded annually, at a rate the government declares quarterly.
Which tax regime are you on?
Section 80C does not apply here, so neither the certificate nor the deemed reinvestment deducts anything.
Your income tax slab
What you keep after 5 years
₹1,96,340
The certificate matures at ₹2,17,355. Tax on the interest takes ₹21,015 of it.
- Invested
- ₹1,50,000
- Matures at
- ₹2,17,355
- Interest earned
- ₹67,355
- Of that, taxable
- ₹67,355
- Effective rate after tax
- 5.53%
NSC is a Government of India small savings scheme issued through post offices, with a rate declared quarterly — not a market-linked product; GrowIQ Capital does not distribute it. Illustration only, computed from the assumptions shown — not a forecast, a projection of any product's performance, or a guarantee. Rates, prices and rules change, so the actual outcome will differ.
The deemed reinvestment does not exist under the new regime
NSC interest is taxable as it accrues, but for the first 4 years it is treated as ploughed back into the certificate — so it also qualifies under Section 80C in the year it accrues. That is the only thing separating NSC from an ordinary five-year deposit.
Section 80C does not apply under the new regime, so neither the certificate nor the interest deemed reinvested deducts anything. All ₹67,355 of interest is taxed as it accrues. What remains is a five-year deposit with no withholding — which is not the same as no tax.
The fifth year is never sheltered under any circumstances: that interest is paid out with the maturity rather than reinvested, so ₹15,540 is taxed with nothing against it, costing ₹4,848.
Illustration only, computed from the assumptions shown — not a forecast, a projection of any product's performance, or a guarantee. Rates, prices and rules change, so the actual outcome will differ.
Nothing is withheld, which is not the same as nothing being owed
Unlike a bank deposit, no TDS is deducted on NSC interest at all. The whole ₹21,015 above is yours to pay through advance tax or when you file, and no certificate arrives to prompt it. Interest that is fully taxable, never withheld, and accruing invisibly inside a certificate is among the most commonly omitted entries in an Indian return — it still appears in your Annual Information Statement.
Illustration only, computed from the assumptions shown — not a forecast, a projection of any product's performance, or a guarantee. Rates, prices and rules change, so the actual outcome will differ.
After tax and 6% inflation, this loses 0.44% a year
7.70% before tax becomes 5.53% after it, at your 30% slab — a real return of -0.44%. With no relief available the interest is taxed in full, which is what pulls the real return down.
The rate above counts tax on the interest only. The deduction the certificate itself earns is shown separately, because it is available from any Section 80C instrument rather than being a feature of this one.
Real return compounds the two rates rather than subtracting them, and the inflation figure is your assumption rather than a published forecast. Illustration only, computed from the assumptions shown — not a forecast, a projection of any product's performance, or a guarantee. Rates, prices and rules change, so the actual outcome will differ.
Year by year
Interest is taxable in the year it accrues, even though nothing is paid to you until maturity. The shaded row is the fifth year, whose interest is paid out and so has no reinvestment relief against it.
| Year | Interest accrued | Deemed reinvested | Taxable | Tax due | Balance |
|---|---|---|---|---|---|
| 1 | ₹11,550 | — | ₹11,550 | ₹3,604 | ₹1.62L |
| 2 | ₹12,439 | — | ₹12,439 | ₹3,881 | ₹1.74L |
| 3 | ₹13,397 | — | ₹13,397 | ₹4,180 | ₹1.87L |
| 4 | ₹14,429 | — | ₹14,429 | ₹4,502 | ₹2.02L |
| 5paid out | ₹15,540 | — | ₹15,540 | ₹4,848 | ₹2.17L |
Illustration only, computed from the assumptions shown — not a forecast, a projection of any product's performance, or a guarantee. Rates, prices and rules change, so the actual outcome will differ.
What this assumes
- The same 80C headroom in every one of the five years. In reality EPF, insurance and a home loan renew annually and so does the ceiling, so the room available for the reinvestment will move year by year.
- Interest is declared on accrual. That is the treatment the deemed reinvestment depends on. Declaring the whole of it at maturity instead forfeits the relief entirely and bunches the income into one year.
- Your slab rate stays where it is, and the rate holds for the full term though the government resets it quarterly.
- The five-year lock-in is absolute apart from limited cases such as the holder’s death, a court order or forfeiture by a pledgee. Surcharge is excluded; the 4% cess is included in the tax figures.
No returns are assured or guaranteed. Any illustration of returns is a mathematical projection, not a promise. The National Savings Certificate is a Government of India small savings scheme issued through post offices. GrowIQ Capital is a mutual fund distributor, neither distributes it nor provides tax advice — this is arithmetic on the figures you entered, for discussion with a qualified tax adviser.
How the NSC tax calculation works
Interest accrues annually and is taxable; for years 1–4 it is also deductible under 80C
Interest compounds annually and is taxable in the year it accrues, even though nothing is paid to you until maturity. For the first four years it is deemed reinvested in the certificate and so also qualifies under Section 80C, which can offset the tax on it — but only as far as your remaining headroom goes, since that ceiling is shared with EPF, PPF, insurance and ELSS. The fifth year's interest is paid out with the maturity and has no relief against it. Note that a ₹1.5 lakh certificate fills the ceiling on purchase, so its own first year of interest is taxed too. There is no TDS on NSC at all, which does not make the interest exempt.
Frequently asked questions
Is NSC interest taxable?
Yes, as it accrues, even though nothing is paid to you until maturity. For the first four years the accrued interest is treated as reinvested in the certificate and therefore also qualifies for a Section 80C deduction, which can offset the tax on it. The fifth year's interest is paid out with the maturity proceeds, so it is taxed with nothing against it.
Does the NSC reinvestment deduction actually help?
Only if you have Section 80C headroom left. It draws on the same ₹1.5 lakh as EPF, PPF, insurance premiums, home loan principal and ELSS — and for most salaried people that ceiling is already full, in which case the reinvestment deducts nothing and the interest is taxed every year with no relief.
Is there TDS on NSC?
No. Nothing is withheld on NSC interest, unlike a bank fixed deposit. That does not make it exempt — the interest is fully taxable and payable through advance tax or when you file, with no certificate arriving to prompt it. It is among the most commonly omitted entries in an Indian return.
Does NSC save tax under the new regime?
No. Section 80C does not apply under the new regime, so neither the certificate nor the deemed reinvestment earns any deduction. The interest remains fully taxable each year, which makes NSC a five-year deposit with no withholding and no relief.
Why is my first year's NSC interest taxed even though 80C is free?
Because the certificate itself claims the ceiling when you buy it. Investing the full ₹1.5 lakh uses the whole allowance in year one, leaving nothing for that year's accrued interest to be set against. A smaller certificate leaves room and its first year's interest is sheltered too.
What is the NSC lock-in?
Five years, with premature encashment allowed only in limited circumstances such as the holder's death, a court order, or forfeiture by a pledgee. Interest compounds annually at a rate the government declares quarterly.
GrowIQ Capital provides financial data analytics, market information and educational content. We are not a SEBI-registered Investment Adviser or Research Analyst. Nothing on this platform constitutes investment advice or a recommendation to buy or sell any security. No returns are assured or guaranteed. Any illustration of returns is a mathematical projection, not a promise. Past performance is not indicative of future returns and does not guarantee future results.