New Delhi: With the financial year (FY 2025-26) entering its final quarter, millions of Indian taxpayers are looking for safe investment options to save tax under Section 80C. In a significant update for small savers, the Ministry of Finance has announced the interest rates for small savings schemes for the January to March 2026 quarter.
The government has decided to keep the interest rate for the National Savings Certificate (NSC) unchanged. This is good news for investors who were worried about a potential rate cut due to fluctuating bond yields.
Here is a detailed report on the current NSC rates, why it is trending, and how it compares to other investment options for your tax planning.
Current NSC Interest Rate (Q4 FY 2025-26)
For the quarter ending March 31, 2026, the interest rate for the 5-year National Savings Certificate remains stable.
- Interest Rate: 7.7% per annum
- Compounding: Compounded annually but payable at maturity.
- Lock-in Period: 5 Years
- Minimum Investment: ₹1,000
This means if you invest in NSC today, you lock in a return of 7.7% for the next five years, regardless of how market rates change in the future.
Why NSC is Trending in January 2026
Every year in January, search interest for “NSC” spikes. Here is why this instrument is crucial right now:
1. Last Chance for Section 80C Tax Saving
The deadline to make tax-saving investments for the Financial Year 2025-26 is March 31, 2026. Investments in NSC qualify for a tax deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Many salaried employees are rushing to Post Offices to buy NSCs to reduce their taxable income before the year ends.
2. No TDS Deduction
Unlike Bank Fixed Deposits (FDs), where banks deduct tax (TDS) if the interest exceeds a certain limit, no TDS is deducted on NSC interest at the time of payout. However, the interest earned is technically taxable and must be declared in your Income Tax Return (ITR).
3. Safe & Guaranteed
Since NSC is backed by the Government of India (sovereign guarantee), it is considered one of the safest investments, with zero risk of default.
NSC vs. Bank Fixed Deposits (FDs)
With many banks adjusting their FD rates in 2026, how does NSC stand?
| Feature | National Savings Certificate (NSC) | Bank Fixed Deposit (5-Year Tax Saver) |
| Interest Rate | 7.7% (Fixed) | 7.0% – 7.5% (Varies by Bank) |
| Safety | Sovereign Guarantee (Govt) | DICGC Cover (up to ₹5 Lakh) |
| Lock-in | 5 Years | 5 Years |
| TDS | No TDS Deducted | TDS Deducted (if >₹40k/₹50k) |
| Who can open? | All Citizens (Minors too) | All Citizens |
Note: Senior Citizens might get higher rates (up to 8.2%) in the Senior Citizen Savings Scheme (SCSS), so NSC is usually recommended for non-senior citizens.
How to Invest in NSC Online?
Gone are the days when you had to stand in long queues at the Post Office. You can now open an NSC account online if you have access to Net Banking with a participating bank or the Department of Posts.
- Log in to your Post Office Internet Banking.
- Go to the “General Services” > “Service Requests” tab.
- Select “New Request” > “NSC Account – Open a NSC Account”.
- Enter the deposit amount (Min ₹1,000) and submit.
Important Rule for 5th Year
A unique benefit of NSC is that the interest earned for the first 4 years is considered “re-invested.” This means the interest itself qualifies for an 80C deduction for those years. However, the interest earned in the 5th (final) year is paid out to you and is fully taxable.
Frequently Asked Questions (FAQs)
Q1: What is the current interest rate of NSC for Jan 2026?
The interest rate for the National Savings Certificate is 7.7% per annum for the January–March 2026 quarter.
Q2: Is the interest earned on NSC tax-free?
No, the interest is taxable. However, no TDS is deducted by the Post Office. You must add the interest income to your ITR.
Q3: Can I withdraw my NSC money before 5 years?
Premature withdrawal is generally not allowed in NSC. It is only permitted in specific cases like the death of the account holder or on a court order.
Q4: What is the maximum limit for NSC investment?
There is no maximum limit for investing in NSC. You can invest as much as you want, but the tax benefit under Section 80C is capped at ₹1.5 lakh.
Q5: Is NSC better than PPF?
PPF (Public Provident Fund) currently offers 7.1% interest but has a longer lock-in of 15 years and is tax-free. NSC offers a higher rate (7.7%) with a shorter lock-in (5 years) but the returns are taxable.