1) The National Savings Certificate (NSC) is eligible for tax deduction under Section 80C for an investment of up to Rs 1 lakh. One can invest in five- or 10-year NSCs.
2) The interest on the NSC is fixed in April every year. The current rate is 8.5% for five years, and 8.8% for 10 years.
3) The interest accumulated every year can be deducted from Rs 1 lakh investible in that year for saving tax, as it is considered to be invested for this purpose.
4) The interest is taxable, but since it can be reinvested as part of Section 80C investment, it makes NSC an attractive option.
5) Investors have to keep an account of the interest received each year and ensure that the overall investment, including the interest, is in the Rs 1 lakh limit.
