NSC, or National Savings Certificate, is a fixed-income savings instrument available at post offices, with a lock-in period of 5 years and an interest rate declared by the government, revised quarterly for new investments. The interest compounds annually but is only actually paid out to you at maturity, along with your original investment, rather than periodically.
Investments in NSC up to ₹1.5 lakh a year qualify for a Section 80C tax deduction, making it a useful tool for tax-saving investors who are comfortable with a 5-year lock-in and prefer government-backed safety over market-linked investments. One quirk to be aware of is that although the interest is only paid at maturity, it is technically taxable each year as it accrues — though the interest for the first four years is itself treated as reinvested and can be claimed under 80C again in most cases.