Which is better? National Saving Certificate or FD

Investments have become a common way through which people deal with their money. Thereby, there are a number of investment options out there that are available for potential investors. However, amongst all, NSC or National savings certificate and fixed deposits are the most common investment tools wherein people prefer to pool their funds in. NSC or National savings certificate is a savings instrument regulated by the Government of India. In the NSC, the depositors can make an investment through savings bonds. The fixed deposit on the other hand is an investment option, where the depositor deposits his money with the bank or post office and is rewarded with an interest in return.

Both these investment products allow people to avail tax deductions under section 80 C of the Income Tax. Further, both NSCs and FDs are offered by both Banks and post offices, thus, giving depositors a number of options to invest. However, when it comes to choosing one amongst the two, all investors should make a proper comparison of certain parameters. A comparison between NSC and fixed deposit is listed in the below-mentioned table, that highlights the features of both on certain common parameters.

ParameterNational Saving Certificate (NSC)Fixed Deposits (FD)
Investment limitNo restrictions on the maximum investment limit.No restriction on the maximum investment amount.
Investment tenureNSC requires a lock in period of five years.FDs also require a lock in period of five years.
Interest rateInterest rate on the NSC is regulated by the Central Government.The interest rates on fixed deposits vary across all banks.
Benefit on taxNSC investors can avail a tax benefit up to Rs 1.5 lakhs under section 80 C of the income tax act.Even Fixed deposits allow a tax benefit. However, it can only be availed on the tax saving Fds made for five years and not for a lower tenures.
TDSNSC allows no tax-deduction- at-source.Tax savings Fds are eligible for TDS deductions.
Loan facilityNSC can be used to borrow secured loans, by keeping the savings bonds as a mortgage.Tax saving FDs of five years cannot be used to borrow a loan. However, loans can be borrowed on Fds with non-tax saving facilities.
Compounding yieldThe compounding yield on NSC is annual.FDs are yielded on Quarterly basis.

On a concluding note, it must be understood that, when it comes to choosing one amongst the two the investor should make a decision based on his own discretion. Both NSC and Fd are safe and secure means to invest your money. However, both of them offer no liquidity, as funds can only be withdrawn after a lock-in period of five years. However, NSC can allow you to borrow a loan, a tax saving Fd won’t allow a loan against it. FDs however, can provide  you a high interest rate, in case the bank is providing a good Fd interest rate. When it comes to NSC v/s FD, both these investment schemes have their own advantages and disadvantages associated with it. The investor should thus make a comparison before choosing ‘the best’ for him or her.

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