FD vs NSC

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Investment decisions require you to consider your available corpus of funds, risk profile and needs. After all, you have several investment options to choose from, such as gold, stocks, NSC, fixed deposits, mutual funds, and more.

You may also be eager to know about FD vs NSC and each of their features. NSC, which stands for the National Savings Certificate, is offered under the postal savings system of India. It includes investments in government savings bonds.

Fixed Deposits (FDs), on the other hand, are offered by banks and NBFCs. By investing in FDs, you can earn interest on your deposited money over a fixed tenor.

What are the Differences Between an FD and NSC?

The list of safe and popular investment options generally includes National Savings Certificates and Fixed Deposits. Having thorough knowledge about these traditional investment avenues can help you make a better choice.

NSC is a safe investment option because it is backed by the Government of India. This means that investing in NSC is considered as a secure and reliable option. On the other hand, an FD also offers guaranteed returns with zero or minimal risk.

For the period between April and June 2023, NSC offers an annual interest rate of up to 7.7%. It is important to note that NSC has a lock-in period of 5 years, meaning you cannot withdraw the money before that time.

On the other hand, the returns on FDs vary depending on the financial institution but typically fall within the range of 5% to 8.60% or more.

Additionally, when you invest in fixed deposits, you have the option to receive interest payments on a monthly, quarterly, half-yearly or annual basis. This allows you to choose the payout from your FD investment based on your needs and goals.

Unlike NSC, fixed deposits also provide you with the flexibility to choose the tenor from a wide range of options. While the NSC is completely risk-free, FDs are considered relatively low-risk investments. This is more so when FDs are compared to mutual funds and other options.

FDs are also covered under the Deposit Insurance and Credit Guarantee Corporation (DICGC) deposit insurance. This comes with a maximum sum insured of ₹5 Lakhs (including both principal and interest amounts).

FD vs NSC: A Head-to-Head Comparison

Features	Fixed Deposit (FD)	National Savings Certificates (NSC)
General	FDs are term deposits offered by banks, post offices and NBFCs.	The Indian government provides NSC as an investment option.
Tenor	Flexible tenors ranging from 7 days to 10 years.	Your money will be locked in for either 5 or 10 years, depending on the option you choose.
Rate of Interest	Interest rates range from 5% to 8.60% or more in general. However, different issuers offer different FD interest rates for different tenors and investor profiles.	The rate of interest is dynamic. It is currently 7.7%.
Tax Benefits	Interest earned from fixed deposits is fully taxable. But, as per Section 80C, you can get a tax deduction of up to ₹1.5 Lakhs per year by investing in a tax-saving fixed deposit (FD) that has a minimum tenor of 5 years. Thus, you can reduce your taxable income by investing in such FDs.	NSC is exempt from income tax. Under Section 80C of the Income Tax Act, 1961, you have the opportunity to avail a tax deduction of up to ₹1.5 Lakhs.
TDS	Applicable	Not applicable
Risks	The only risk with a bank FD or a company FD is the issuer going bankrupt or defaulting. However, bank FDs are insured by the DICGC up to ₹5 Lakhs. You can choose company FDs based on safety ratings issued by ICRA and CRISIL to reduce the risk of default.	No risk is associated with investing in NSC as it is backed by the Government of India.
Loan	Many banks and financial institutions allow you to take loans using your FD as collateral. For example, with a Bajaj Finance FD, you can borrow up to 75% of the total invested amount.	You can use NSC accounts as collateral to secure loans. You can use it as a guarantee at a bank or a financial institution.

Benefits of an FD

Here are some benefits of fixed deposits you must know, so you can plan your investment better.

Fixed deposits offer higher returns in comparison to savings accounts, ensuring guaranteed payouts throughout the entire duration of your investment.

Tax-saving fixed deposits come with a lock-in period of five years. Such an FD enables you to claim an exemption on your taxable income of up to ₹1.5 Lakhs under Section 80C.
The automatic online renewal facility of FDs eliminates the need for you to visit the bank in person, making the renewal process more convenient.
You have the flexibility to open multiple fixed deposits at the same or different financial institution/s. By laddering your FD investments, you can time your payout to meet specific goals with ease.
You can choose to receive the interest earnings in frequent intervals or at maturity. This gives you the flexibility of getting a payout based on when you need funds.
FD schemes are easily available at most banks, post offices and NBFCs, and you can start your FD online via internet banking hassle-free.
You can access liquidity with your FD investment by paying a small penalty for premature withdrawal. You can also get financing with a loan against your FD.

Benefits of the NSC Scheme

The National Savings Certificate scheme offers several advantages that are worth considering. Read on to understand a few of them.

NSC ensures consistent returns throughout the investment period and generates higher returns by virtue of the annual compounding of interest.
Investing in NSC offers tax benefits under Section 80C, and both the invested amount and the interest earned are eligible for tax exemption.
NSC provides safety and reliability because this investment is supported by the government, making it ideal for you if you are risk averse.
You can conveniently submit the required KYC documents and start your NSC investment with ease at post offices.
You have the flexibility to invest in NSC with a minimum amount of ₹1,000 and no maximum limit.
NSC can be started on behalf of a minor and also serves as collateral for securing loans, making it a versatile investment option.

FD and NSC - Common Features

Features	NSC	Fixed Deposit
Lock-In Period	5 years	5 years (for a tax-saver FD)
Investment Limit Cap	No Bar	No Bar
Tax Benefit	Up to ₹1.5 Lakhs	Up to ₹1.5 Lakhs
Liquidity	Can be used as collateral for loans	Can be used as collateral for loans

FD and NSC – Differences in Features

Features	NSC	Fixed Deposit
Compounding frequency	Annually	Every quarter (usually)
TDS	Not deducted	Deducted
Interest rate	7.7% (as of May 2023)	Different banks and NBFCs have different interest rates with one of the highest at 8.60% (as of May 2023)

Which to Invest in: FD or NSC?

NSC vs FD seems to be a common topic of discussion as both are great options to invest in. However, investing in fixed deposits is quite simple in comparison, giving you greater control over your investment.

With the Bajaj Finance FD scheme, for instance, you can start your investment journey with as low as ₹15,000. You can also leverage the benefits of flexible tenors, high interest rates and easy online application processes.

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

Disclaimer

The information provided by BFDL herein above is related to the Non-Partnered Banks/ NBFCs and is just for the purpose of information and under no circumstances the information provided hereinabove is intended to be source of advice or recommending any financial investment advice or endorsement of any sort.

The information including interest rates with regard to fixed deposit, provided on this website is gathered through publicly available sources over the internet and is considered as accurate and reliable to the best of our knowledge. BFDL disclaims any responsibility or liability regarding inaccuracies, omissions, mistakes etc. as well as offers by the Non-Partnered Banks. The use of 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. You are advised to visit/ contact the respective Banks/ NBFCs to verify the information before making any investment or opening an account. Further, BFDL does not undertake any responsibility or liability to update this information. YOU ARE SOLELY RESPONSIBLE FOR ANY LIABILITY OR DAMAGE YOU INCUR THROUGH ACCESS TO OR USE OF THE SITE OR SUCH INFORMATION OR MATERIALS EXCEPT WHERE THE LAWS AND REGULATIONS OF A PARTICULAR JURISDICTION CONCERNING WARRANTIES CANNOT BE WAIVED. Additionally, display of any trademarks, tradenames, logo and other subject matters of intellectual property owners. Display of such Intellectual Property along with the related product information does not imply BFDL’s partnership with the owner of the Intellectual Property of such products.

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Monthly Interest on FD

NSC stands for National Savings Certificate, which 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.

You can now invest in NSC online through the electronic mode (e-mode) provided by the government. You can invest in it at all public sector banks as well as ICICI, HDFC, and Axis Banks.

All you need is a savings account in these banks or one with the 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.

First, you need to have e-mode enabled for NSC to check certificates online. You need to have access to Internet banking through which you will be able to check your NSC certificate online, just like online Bank FDs or RDs.

NSC is exempt from income tax under Section 80C of the Income Tax Act, 1961. Thus, you get a tax benefit of up to ₹1,50,000 each financial year.

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

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

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

During the initial four years, you can get an exemption from tax on the NSC income you earn based on Section 80C. However, in the last or fifth year, the interest you get is taxed as per your tax slab. This is because it is not reinvested but handed over to you as income.

NSCs have a fixed lock-in period, and you cannot close an NSC before maturity. The only exceptions are the demise of the investor, if the court passes an order stating the investment is to be withdrawn or if the certificate becomes forfeit.

There is no restriction on how many NSCs you can invest in. However, there is a restriction on the tax benefits you can avail of.