| Year | Opening balance | Interest this year | Closing balance |
|---|---|---|---|
| 1 | ₹1,00,000 | ₹7,700 | ₹1,07,700 |
| 2 | ₹1,07,700 | ₹8,293 | ₹1,15,993 |
| 3 | ₹1,15,993 | ₹8,931 | ₹1,24,924 |
| 4 | ₹1,24,924 | ₹9,619 | ₹1,34,544 |
| 5matures | ₹1,34,544 | ₹10,360 | ₹1,44,903 |
Your deposit of ₹1,00,000 claims Section 80C in year 1. The interest of years 1 to 4, ₹34,544 in all, is deemed reinvested and can be claimed under 80C again in each of those years, within the same ₹1.5 lakh ceiling. Only the final year's interest, ₹10,360, is taxable with no fresh 80C shelter. NSC has no TDS, so nothing is deducted at source, but the interest is still taxable in your hands.
| NSC | 5-yr tax-saving FD | PPF | |
|---|---|---|---|
| Lock-in | 5 years | 5 years | 15 years |
| 80C on deposit | Yes | Yes | Yes |
| Interest taxable | Yes, mostly 80C-shielded | Yes, fully | No, tax-free |
| TDS | None | Yes, above ₹40k | None |
| Value at year 5 | ₹1,44,903 | ₹1,38,042 | still locked |
NSC and a 5-year tax-saving FD are the closest match: both give 80C, both lock for five years. The FD figure above assumes a 6.5% rate compounded quarterly, and its interest is taxable every year with TDS once it crosses ₹40,000, so a top-slab saver keeps less than the headline. NSC has no TDS and its years 1 to 4 interest can be re-claimed under 80C. PPF sits in a different bracket: a 15-year lock-in, but fully tax-free interest and maturity. Full workings in the FD calculator and the PPF calculator.