FD vs NSC: Making the Right Choice | Investment Comparison

Investors are often looking for secure and government-backed investment options. FDs and NSCs are both viable choices. These financial instruments have distinct features. They offer a balance between safety and returns.

Due to fluctuating interest rates, it's crucial to understand FDs and NSCs. The national savings certificate is a savings tool and a part of the Indian Post Office savings scheme. On the other hand, fixed deposits are offered by different issuers. They offer guaranteed returns with the option for periodic interest payments. Though they may share certain common features like loan facilities.

Comparative Analysis of Fixed Deposits vs National Savings Certificates

The below table outlines the difference between the two investment tools:

Features	Fixed Deposit	National Savings Certificates
Offered by	Banks, post offices, NBFCs, and HFCs	Government of India
Tenor	7 days to 10 years; 5-year lock-in for tax-saver FDs	5 years or 10 years (depending on certificate type)
Rate of Interest	Varies across banks and NBFCs	Up to 7.70% p.a. (April-June 2024 quarter)
Interest Rate Changes	Interest rates are subject to change as per the issuer’s policies	Reviewed on a quarterly basis by the government
Taxation	Interest earned is taxed as income	Interest reinvested and taxed upon maturity

Tax Benefits	Tax-saver FDs - Up to ₹1.50 Lakhs u/s 80C of the Income Tax Act, 1961	Deductions of up to ₹1.50 Lakhs under Section 80C
TDS	10% if interest > ₹50,000 (for senior citizens) or ₹40,000 (for general public); 20% if no PAN details submitted	No TDS
Safety	Up to ₹5 Lakhs insured by Deposit Insurance and Credit Guarantee Corporation (bank FDs only)	Backed by the Government of India
Premature Withdrawal	Subject to penalty charges; Tax-saver and non-callable FDs do not allow premature withdrawals	Not allowed due to lock-in period
Risk	May miss out on higher market returns	Lower market risk, but potential inflation risk due to fixed returns

Note: Values mentioned in the table are subject to changes in government and FD issuer policies.

Choosing between an FD and NSC depends on your financial goals, risk tolerance, and investment preferences. FDs offer stability for investors. They could be a suitable choice for those seeking secure investments. This is possible because FDs offer guaranteed returns and security.

NSC is secured by the government. It offers a tax-saving option with a fixed interest rate. This is appealing for investors looking for both investment security and tax benefits.

Carefully consider your financial condition, risk appetite, and the market conditions before deciding. FDs and NSCs are valuable tools. They help diversify investment portfolios by catering to different preferences.

Fixed Deposit and Other Investment Comparisons
Bonds Vs FD	FD Vs RD	NPS Vs FD
Certificate Of Deposit Vs Fixed Deposit	FD Vs Real Estate	PPF Vs FD
Corporate FD Vs Bank FD	Fixed Deposit Vs Life Insurance	Short Term FD Vs Long Term FD
Cumulative Vs Non Cumulative FD	Fixed Deposit Vs Savings Account	SIP Vs FD
Debt Funds Vs FD	Liquid Fund Vs FD	Sukanya Samriddhi Yojana Vs FD
ELSS Vs FD	MIS Vs FD	Time Deposit Vs Fixed Deposit
Equity Vs Fixed Deposit

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