Guide
NSC and KVP: post office certificates that pay everything at the end
Post office certificates are among the simplest savings products there are. You buy one for a sum, you hold it for the set term, and you get the principal and the interest together at the end. There is nothing to manage and nothing to reinvest, and the government stands behind the payment. The two most common are the National Savings Certificate, which runs for five years, and the Kisan Vikas Patra, which is designed to double your money.
National Savings Certificate
The NSC compounds interest once a year at the rate in force when you buy it, and the whole amount is paid after five years. The maturity value is the investment × (1 + rate)^5. For 1,00,000 at 7.7% that is 1,44,903, so the interest is 44,903 and the effective return over five years is 44.90%. The table shows the interest accruing each year: 7,700 in the first, 8,293 in the second, 8,931 in the third and 10,360 in the fifth, each larger than the one before because it is earned on a growing balance.
Kisan Vikas Patra
The KVP is defined by doubling. You pay a sum and receive twice that sum at maturity; the number of months is chosen so that the rate you are paid produces exactly that. The page computes the months from the rate: ln 2 ÷ ln(1 + rate) years, times 12. At 7.5% that is 115.0 months, 9 years 7 months, and 1,00,000 matures at 2,00,000, a gain of 1,00,000. The government reviews the rate every quarter and sets the period to match each tranche.
A worked comparison
Both certificates in the sample start with 1,00,000. After five years the NSC is worth 1,44,903. The KVP takes more than nine years to reach 2,00,000. Per year, the NSC at 7.7% and the KVP at 7.5% earn almost the same, since they are both annual compounding at similar rates. The difference is the time: the NSC is five years, so it suits a medium-term goal, and the KVP is nearly ten years, so it suits a longer one. To compare with a bank deposit, use the FD calculator and remember that the bank’s interest may be taxed along the way.
Tax
Interest on both certificates is taxable. For the NSC the interest accrues each year, and tax is due each year even though payment is at maturity. An NSC purchase qualifies for the section 80C deduction in the old tax regime, and so does the reinvested interest of the first four years. The KVP does not qualify for 80C. The tax box applies one rate to the whole interest, which is a fair guide but not the year-by-year treatment.
Choosing a rate
Enter the rate that applies on the day you buy, which the post office displays. It stays for the whole life of that certificate even when the government changes the rate for new ones. If you plan to buy later, try the rates you think are likely. For the KVP, a lower rate lengthens the doubling period and a higher rate shortens it.
Edge cases
The investment must be positive and the rate above zero, since a doubling time does not exist otherwise. The NSC term is fixed at five years in the page. The KVP maturity is always twice the investment by definition. Premature encashment is allowed only in limited cases and is not modelled.
Limits
Certificates are issued for sums with a minimum amount and, for some, multiples, which the page does not check. The rates and terms change, and the rules of the schemes may change, so verify them at the post office before you invest.
Related tools
- PPF Calculator shows a longer, tax-free government account.
- FD Calculator offers a bank deposit to compare with a certificate.
- SCSS Calculator covers the scheme that pays interest out each quarter.
- Rule of 72 Calculator gives a quick estimate of doubling time at any rate.
Checked against the current version of the NSC and KVP Calculator on .