National Savings Certificate: 7.7% for 13 straight quarters; 5 things to know before September 30 announcement

The National Savings Certificate (NSC) offers 7.7% per annum. This rate was set on April 1, 2023, with the biggest single hike of the current small savings rate cycle. But it has not moved for the 13 quarters since, according to National Savings Institute (NSI) data. If September 30 notification for the October-December 2026 quarter leaves the scheme untouched, it would be the 14th consecutive quarter at 7.7%.

The NSC is a five-year certificate with a minimum investment of ₹1,000 and no upper limit. Interest compounds annually and is paid at maturity. A ₹1 lakh certificate at 7.7% can grow to about ₹1.45 lakh at maturity and ₹5 lakh in this scheme can become roughly ₹7.25 lakh at the current rate.

The investment in NSC account qualifies for Section 80C deduction up to the ₹1.5 lakh limit. The interest deemed reinvested in the first four years also counts towards 80C. However, the interest itself is taxable at slab rate. The NSC certificates can be pledged as loan collateral.

Under the Shyamala Gopinath Committee framework, the five-year NSC is benchmarked to the 5-year G-sec with a 25-basis-point spread. In the July-September reference quarter, the 5-year G-sec averaged roughly 6.5%, implying a formula rate of about 6.75% against the 7.7% actually paid. This gap of nearly 95 basis points with the formula rate is the widest among all small savings schemes. The five-year G-sec ended September at 6.5-6.7% after a six-week bond rout, which narrowed this gap somewhat.

The government has so far chosen not to apply the Shyamala Gopinath Committee's formula mechanically for nine quarters. Small savings collections also fund government borrowing through the NSSF. Given the G-sec market trends, one can expect no cut in the NSC rate but may remain hopeful for a hike. 4)How it compares to the 5-year post office FD?

The NSC and the five-year time deposit are pegged to the same benchmark, but the NSC pays 7.7% against the TD's 7.5%. Both qualify for 80C deduction. Bank five-year FD rates have declined through 2025-26 after the RBI's four rate cuts in 2025, which leaves the NSC among the best tax-saving fixed income options in the market.

The NSC rate is locked at the time of purchase for the full five years. A certificate bought before October 1 would earn 7.7% no matter what Wednesday's notification says. Taxpayers still doing 80C investments before March 31 can use this to lock in certainty.