1Is NSC interest taxable?
Yes — NSC interest is taxable each year as it accrues. But the reinvested interest (except the final year's) also qualifies for the 80C deduction, partly offsetting the tax.
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ArticleThe National Savings Certificate (NSC) is a safe, post-office 80C option with a useful quirk — its interest is reinvested and itself qualifies for 80C. Here's how NSC is taxed.
Reviewed by CA Harika Chebolu, FCA · Last updated 2026-06-13
Quick answer
National Savings Certificate gives an 80C deduction, and its reinvested interest also qualifies for 80C — though the final interest is taxable. Here's how.
Investing in NSC qualifies for the Section 80C deduction, within the Rs 1,50,000 limit, in the old regime. It's a fixed-return, government-backed option with a five-year term.
NSC's distinctive feature: the interest it earns each year (except the final year) is deemed reinvested, and that reinvested interest also qualifies for the 80C deduction. So the accruing interest can quietly add to your 80C claim year after year.
Although reinvested, the interest is taxable income each year — you declare it as income and simultaneously claim the reinvested portion under 80C. In the final year, the last year's interest is taxable but isn't reinvested, so it doesn't get the 80C benefit.
NSC interest typically doesn't have TDS deducted, but it's still taxable and should be reported as accrued interest each year. Many people forget the annual interest because it isn't paid out — declare it to stay accurate.
NSC is safe and the reinvested-interest 80C quirk is handy, but the interest is taxable, unlike PPF. It suits conservative savers who want a fixed, government-backed 80C option with a shorter term than PPF.
Yes — NSC interest is taxable each year as it accrues. But the reinvested interest (except the final year's) also qualifies for the 80C deduction, partly offsetting the tax.
Yes — both the initial investment and the reinvested annual interest qualify under Section 80C , within the Rs 1,50,000 limit, in the old regime.
Generally no TDS is deducted on NSC interest, but it's still taxable and must be reported as accrued interest each year — a commonly forgotten step since it isn't paid out.
Using NSC in your 80C mix? Write to the firm and we'll handle the reinvested-interest treatment correctly.