National Savings Certificate Premature Withdrawal


National Savings Certificates (NSC) are a low-risk investment option in India. Offered by post offices, they come with a fixed interest rate for a 5-year tenure and qualify for tax deductions under Section 80C. You can invest any amount starting from ₹1000 and benefit from compounded interest for the first four years.

While ideally suited for long-term saving goals, NSCs allow for premature withdrawal under exceptional circumstances with a penalty. If you withdraw your money within the first year, you'll only receive the principal amount and no interest. After one year, the penalty reduces the interest earned based on the withdrawal period.

Let’s go through the NSC withdrawal rules before maturity, calculate the withdrawal amount and much more in detail on premature withdrawal of NSC. Read on to know more!


The current interest rate for NSC is 7.7% p.a. This rate is compounded annually for the first four years and then paid out along with the principal amount at maturity (5 years)

Rules For Premature Closure of National Savings Certificate

While NSCs typically have a 5-year lock-in period, there are a few exceptions where you can withdraw your money early without facing a penalty on the interest earned:

  • Death of Account Holder(s): In case of the unfortunate demise of the sole account holder or all account holders in a joint NSC, the nominee or legal heir(s) can withdraw the money without penalty.
  • Forfeiture by Gazetted Officer Pledgee: If you have pledged your NSCs as security for a loan and the lender is a Gazetted Officer (a high-ranking government official), and they decide to forfeit the NSCs due to non-payment of the loan, the early closure won't incur a penalty.
  • Court Order: If a court issues a legal order mandating the withdrawal of your NSCs before maturity, you can withdraw them without penalty.

National Savings Certificates are of 2 types. The NSC VIII Issue is a fixed 5-year savings plan, while the NSC IX Issue is a fixed 10-year investment scheme. Both plans offer a secure way to grow your savings over the long term.

Key Points Before NSC Premature Withdrawal

Here are the key points to note before the premature withdrawal of a National Savings Certificate (NSC):

  • Lock-in Period: NSCs have a fixed lock-in period, typically ranging from 5 to 10 years. Premature withdrawal before the completion of the lock-in period is generally not permitted, except in specific circumstances.
  • Interest Rates: The interest rates on NSCs are fixed for the entire tenure. Premature withdrawal may result in a lower interest rate being applicable on the withdrawn amount.
  • Penalty Charges: Premature withdrawal of an NSC may attract a penalty charge, which is typically a percentage of the withdrawn amount. The penalty charges vary across different schemes and can range from 1% to 2% of the withdrawn amount.
  • Tax Implications: Interest earned on NSCs is taxable as per the applicable income tax slab rates. Premature withdrawal may impact the tax treatment of the interest earned, and the tax liability may change accordingly.
  • Reduced Returns: Premature withdrawal of an NSC typically results in a lower overall return on the investment compared to holding the NSC for the full tenure.
  • Exceptional Circumstances: In certain exceptional circumstances, such as medical emergencies or the death of the account holder, premature withdrawal of an NSC may be permitted without penalty. However, the specific guidelines and documentation requirements should be verified.
  • Withdrawal Process: The process for premature withdrawal of an NSC involves submitting the necessary application form, providing the required documents, and visiting the designated bank or post office branch.

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Calculation of NSC Premature Withdrawal Value

Table showing NSC premature closure value of account opened on or after the date of notification with ₹1000

Period from Account Opening to Premature Closure Amount Payable (including Interest)
From 3 Years to < 3.5 Years ₹1221.61
3.5 Years to < 4 Years ₹1263.05
4 Years to < 4.5 Years ₹1305.90
4.5 Years to < 5 Years ₹1350.20

Check more on National Saving Certificate from the links below:

NSC Interest Rate NSC Tax Benefits
NSC Rules and Guidelines Documents Required for NSC
Post Office NSC NSC Post Office Application Form
NSC Maturity Certificate NSC as Security for Your Loans
NSC Premature Withdrawal NSC Calculator

Compare NSC with other investment options from below:

National Savings Certificate Withdrawal After Maturity

When it comes to withdrawing the NSC’s corpus after maturity, the process is simple. You have the option to encash the matured NSC through online or offline procedures. It's worth noting that you can submit the maturity claim at your nearest post office, not just the issuing post office.

Online NSC Withdrawal

Many post office branches operate under the CBS platform, making the processing immediate and hassle-free if the issuing post office branches are connected. However, there are certain steps to follow:

  • Step 1: Submit the original NSC and your identity proof to the encashing post office.
  • Step 2: The dealing official verifies the credentials from the issuing branch through the CBS channel.
  • Step 3: You receive the maturity proceeds immediately after successful verification.

Offline NSC Withdrawal

If the post office branches are not under the CBS platform, the procedure may take 10 to 12 days. Here are the steps to follow:

  • Step 1: Visit the nearest post office and submit a hand-written maturity claim along with the original NSC, identity slip received during purchase, and valid identity proof.
  • Step 2: The processing and payment are immediate if the identity slip is present. Otherwise, the verification procedure may take longer.
  • Step 3: Without the identity slip, the verification process involves additional steps:
  • Step 4: The postmaster of the encashing post office checks the "Lost and stolen" register before sending it to the divisional office.
  • Step 5: The divisional office forwards the NSC to the issuing post office’s parent divisional office for verification.
  • Step 6: The recipient divisional office verifies the claim in consultation with the issuing post office.
  • Step 7: The NSC follows the same route back if the verification is successful.

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Frequently Asked Questions

Generally, no. NSC has a 5-year lock-in period. Early withdrawal is only allowed in exceptional cases (death of account holder, court order, forfeiture by Gazetted officer pledgee for loan default).

The final amount depends on the interest rate prevailing when you invest. With the current rate of 7.7% compounded annually, a ₹1 lakh NSC would be approximately ₹1.49 lakh after 5 years.

Visit any post office with your original NSC, filled encashment form, and ID proof. You'll receive the maturity amount (principal + interest).

NSC functions similarly to a fixed deposit. You can't redeem it before maturity unless under exceptional circumstances.

No, but it can earn significant interest. At the current rate, a ₹1 lakh NSC grows to about ₹1.49 lakh after 5 years.

It depends, NSC offers tax benefits under Section 80C, while FDs might have higher interest rates from some banks. Consider your needs and compare rates.

Early withdrawal reduces your interest earned. Within 1 year, you get only the principal amount (no interest). After 1 year, reduced interest is paid based on the withdrawal period.

You can withdraw early only in specific situations (death, court order, loan default by Gazetted officer pledgee). Each case may have specific procedures.

Unforeseen emergencies, the death of an account holder, or needing the money before maturity are some reasons.

The process depends on the reason for withdrawal. In most cases, you'll need to visit a post office with the NSC certificate, identity proof, and relevant documents related to the reason for withdrawal (e.g., death certificate for deceased account holder).

The tax benefit under Section 80C may not apply if you withdraw prematurely. Consult a tax advisor for specific details.

There are no specific eligibility criteria, but you'll need a valid reason for early encashment and meet any documentation requirements for that reason.

Early withdrawal penalties from NSC might be lower than some fixed deposits (FDs) but could still be significant. Early withdrawal from other options like mutual funds might have different penalty structures.

Benefits include accessing funds in emergencies. Drawbacks include reduced interest earnings and potential loss of tax benefits.

NSC is a low-risk investment as it's backed by the government. However, the interest rate fluctuations can impact potential returns.

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