Bank Fixed Deposit (FD) vs National Savings Certificate (NSC): Where to invest for higher returns
Fixed Deposit (FD) with a five-year lock-in period are debt instruments with income tax benefits. After the interest rate revision for the July-September quarter, NSC\ gives a 7.7 per cent interest rate, which is much higher than most banks currently offer. The State Bank of India (SBI), and ICICI Bank offer an interest rate of 3% to 7.10% p.a.
to the general public on deposits maturing in seven days to ten years, while HDFC Bank offers an interest rate ranging from 3% to 7.25% on these deposits. Before planning to put your money into these savings schemes, it's important to understand what they are, and how they operate. National Savings Certificate (NSC) is a fixed-income post office savings scheme. The government of India offers it.
One has to visit the post office to activate this scheme. Since the government backs this instrument, it is a low-risk investment option. The minimum amount with which you can open an NSC account is ₹1000 and after that in multiples of ₹100.
There is no limit on the maximum amount that you can invest in this scheme. You can invest in bank and post office fixed deposit schemes. The tenure starts from 7 days to 10 years, but the tax-saving benefits under section 80C are available only on five-year lock-in.
However, the FD interest rates can vary from bank to bank, so check each bank separately. In NSC, you get a cumulative interest on maturity. However, in an FD, you can take a monthly or quarterly interest or on maturity.
Interest is compounded annually in NSC, while in FD, it is compounded quarterly. You cannon renew NSC after the end of the five-year tenure. But in the case of term deposits, there is an auto-renewal facility. The interest rate provided when buying the certificate
. Read more on livemint.com
