Investors seeking secure and government-backed investment options often consider fixed deposits (FD) and national savings certificate (NSC) as viable choices. Both instruments come with distinct features and offer a balance between safety and returns.



Hence, it is most crucial to understand the characteristics of fixed deposits and national savings certificates. This can help you make informed decisions based on your financial goals and preferences.

Comparative Analysis of Fixed Deposits vs NSC

Here’s a comparison between FDs and NSC to help you make an informed decision:

Features

Fixed Deposit (FD)

National Savings Certificates (NSC)

General

Offered by banks, post offices and NBFCs/HFCs

Issued by the Government of India

Tenor

7 days to 10 years; Tax-saver FDs have a 5-year lock-in period

5 years or 10 years, depending on the certificate type

Rate of Interest

Interest rates vary across banks and NBFCs

7.70% p.a. (October - December quarter, 2023)

Taxation

Interest earned on FDs are considered income and are liable for taxation as per the individual’s income tax slab

Interest earned is taxed at the time of maturity 

Tax Benefits

Tax-saver FDs allow for benefits of up to ₹1.50 Lakhs u/s 80C of the I-T Act

Deductions of up to ₹1.50 Lakhs under Section 80C 

Tax Deducted at Source (TDS)

  • 10% if the interest earnings exceeds ₹50,000 for senior citizens and ₹40,000 for regular citizens

  • 10% if interest income exceeds ₹5,000 (applicable to NBFC FDs)

  • 20% if investor fails to submit his/her PAN information with the issuer

No TDS is deducted

Safety

Insured for up to  ₹5 Lakhs insured by Deposit Insurance and Credit Guarantee Corporation (DICGC) in case of bank FDs

Issued by the Government of India and considered one of the safest investment option as they carry the sovereign guarantee

Risk 

While the fixed interest rates at the time of investment provides certainty, investors may miss out on potential higher returns if market interest rates rise during the tenor

Less exposed to market risk. However, may face inflation risk as returns are predetermined.

The choice between FDs and NSC depends on individual financial goals, risk tolerance, and preferences. FDs offer a secure avenue with guaranteed returns and flexibility in tenor This makes it a great option for conservative investors who are looking for stability. 

 

On the other hand, NSCs, backed by the government, provide a tax-saving option with a fixed interest rate, This makes them appealing for those looking for a combination of safety and tax benefits. 

 

As with any investment decision, it is advisable to carefully consider one's financial objectives, risk appetite, and the prevailing economic conditions. Ultimately, both FDs and NSC serve as valuable tools in a diversified investment portfolio, catering to different preferences and financial objectives.

Disclaimer

The information provided by BFDL is related to the rates provided by Banks and Deposit taking NBFCs as available from public domain and under no circumstances is intended to be source of advice or recommendation of any financial investment advice or endorsement of any sort. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers and use of such information set out is entirely at the User’s own risk and User should exercise due care prior taking of any decision, on the basis of information mentioned hereinabove. Display of any intellectual property along with the related product information does not imply BFDL’s partnership with the owner of the intellectual property of such products and is solely for the purpose of information, unless otherwise provided by BFDL.

Frequently Asked Questions

What is NSC?

National Savings Certificate (NSC) is an investment option launched by the government to encourage Indian citizens to save. It is a part of the India Post’s postal savings scheme.

How to invest in NSC online?

You can now invest in NSC online through the electronic mode (e-mode) provided by the government. All you need is a savings account with India Post and access to internet banking. You can invest in it for yourself, on behalf of a minor, or with another adult as a joint account.

Can I get tax benefits by purchasing NSC?

NSC is exempt from income tax under Section 80C of the Income Tax Act, 1961. Thus, you get a tax benefit of up to  ₹1.5 Lakhs each financial year.

Is the NSC interest rate fixed for 5 years?

Yes, the rate of interest for NSC is fixed for five years.

Is NSC a safe investment?

NSC is considered to be a safe investment option. The principal amount is safe, and you get guaranteed returns regardless of market volatility.

Can I get a loan using NSCs?

Yes, it is possible to take a loan using your NSC as collateral..

Can I close an NSC before maturity?

NSCs have a fixed lock-in period, and you cannot close an NSC before maturity. The only exceptions include the investor's demise, a court order for withdrawal, or forfeiture of the certificate.

Is NSC better than FD?

Whether NSC or FD is ‘better’ depends on your priorities. Both offer tax benefits and guaranteed returns, but with key differences.

  • NSC: Tax-free returns up to ₹1.50 Lakhs annually but no premature withdrawals are allowed 

  • FD: Flexible tenors ranging from 7 days to 10 years but tax-saver FDs have a lock-in period of 5 years

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