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.
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).
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. |
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.
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 |
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) |
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 |
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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.