How To Calculate NSC Interest [Download

Calculator]
by Abhinav Gulechha on April 21, 2014
NSC or National Savings Certificate is a very common and popular fixed income instrument in
India. Since it is backed by Government and sold by a huge post office network, it is a safe and
secure and secure investment option for many.
In my earlier post on post office schemes ready reckoner, I have explained in detail about the
various features of NSC like how much to invest, rate of interest, tax benefit etc.
However, since NSC interest is taxable every year, and the interest in NSC is compounded half
yearly, you need to include NSC interest in income from other sources in your tax return, and
also you can claim rebate u/s 80C for that amount.
But practically speaking, it is not very easy and straightforward to calculate NSC interest and due
to this, employees tend to skip declaring this income which can prove costly later at assessment
stage (Read this post on things you should not miss while filing tax return)
So, in this post, I have tried to devise a simple excel calculator which can help readers calculate
their NSC interest for the year for tax purposes.
Interest Calculation on NSC
Interest on NSC will depend on following things:

When you purchased the NSC (this is because rate of interest for NSC is changed by
Govt. every year)
Whether it is a VIII issue (i.e. 5 year NSC) or a IX issue (10 year NSC) (this is because
present rate of interest for XIII issue is 8.5% and IX issue is 8.8%)

Also, we need to understand two main points:

Interest in case of NSC is compounded half yearly that means if the interest is 8.5%, the
effective interest you earn for the year, due to compounding effect is {(1+8.5%/2)^2}-1 =
8.68%
Interest is accrued every year, but paid out together with principal amount at maturity.
But according to Income Tax law, you have to pay tax on accured interest every year

To make this easy for you, I have prepared a calculator where you have to just input the cells
which are marked as blue, and the interest will get calculated automatically.
DOWNLOAD NSC INTEREST CALCULATOR

Below, I have given a screenshot of the calculator, along with numbered stamps to help you
understand the calculation:

1 here you have to enter which type of NSC it is, when it was purchased, and what is the
amount (if you have separate NSC, you have to do separate calculations, and add up the interest
arrived in column 5)
2- Now, for e.g. I purchased NSC on May 14, 2012 for calculating the accrued interest for
financial year 2013-14, I will have to divide the period into 2 parts April 1, 2013 to May 13,
2013 and May 14, 2013 t0 March 31, 2014 why I have to do this is because the multiplier for
each year of NSC is different
3 Now, the first period will be running year 1 and second period will be running year 2 for
NSC

4 Now, I have to enter multiplying factor (this is the amount of accrued interest for every Rs.
100). Since its VIII issue, we will refer NSC VIII issue table and in that since NSC was
purchased on May 14 , 2012 we will refer column April 1, 2012 to March 31, 2013. The row will
be basis the running year of NSC, so answer will be 8.78 and 9.56
5 Here we will calculate the no. of days for each period. This is simple.
6 This is the auto calculated accrued interest amount for given NSC to be declared as income
and correspondingly claimed under Section 80C.
Hope the post gave you some clarity on how to go about calculating NSC interest. Please share
your queries/ thoughts.