Should you invest in fixed deposits or national saving certificates

Choosing between National Saving Certificates (NSC) and fixed deposits (FDs) can be tricky. To make the right choice, you must know more about both these instruments.

National Savings Certificates offered by the Indian government are part of the Indian Postal Service’s postal savings scheme. On the other hand, a fixed deposit is a savings instrument provided by banks and NBFCs with different interest rates.

While several issuers offer fixed deposits, you can choose to invest in a Bajaj Finance online FD to benefit from attractive FD rates and secured returns.

National Savings Certificates

The National Savings Certificate (NSC) is a fixed-income investment option available at any post office branch. The plan is an initiative of the Indian government. It's a savings bond that encourages subscribers – mostly low- to mid-income investors – to save while reducing their tax liability.

You can get it in your yourself, for a juvenile, or as a joint account with another adult at your local post office. The maturity time for NSC is set at five years. The purchase of NSCs has no upper limit, but only investments of up to Rs. 1.5 lakh qualify for a tax credit under Section 80C of the Income Tax Act.

Fixed Deposits

Fixed Deposit (FD) is a financial instrument that provides safe and guaranteed return on your investment. It helps investors save some money for their future requirements. Most importantly, it assures the investor of his principal amount. Various banks are offering higher interest rate to such deposits which provides the much-needed opportunity to the investor to enhance his income financial with ease.

The FD interest rates offered by Bajaj Finance Limited enable investors to grow their money at a higher value. The interest rates go up to 7.50% p.a., with additional rate benefits for senior citizen investors up to 0.25% p.a.

Difference Between NSC and FD





NSC can be used as collateral against loans.

Through the FD you can take loan for up to 75% of your FD amount.

Interest Rate


The interest rate varies depending on the financial institute which may range between 6% – 8%.

Compounding Frequency

The interest earned is compounded annually.

The interest for FD is generally compounded quarterly.


It is not applicable.

TDS is deducted at 10% on the interest earned.

Compare NSC vs FD

1. Tenor

NSCs come with tenors of 60 months or 120 months. Thus, customers don’t get many options when choosing an investment period. Bajaj Finance offers FD tenors ranging between 12 and 60 months. Hence, you get the flexibility to choose your ideal investment period.

2. Rate of interest

NSCs have an interest rate ranging between 6% p.a. to 8% p.a., and it gets calculated every six months. With a Bajaj Finance Fixed Deposit, you can get an interest rate as high as 7.50% p.a. Senior citizens get an additional rate benefit of up to 0.25% p.a.

3. Loan facility for emergencies

In emergencies, you can use both NSCs and FDs as collateral to avail of instant financing. With Bajaj Finance Limited, get loans up to 75% of your FD amount with a loan against a Fixed Deposit.

4. Tax benefits

The interest you earn from an NSC is exempted from income tax under Section 80C. With an FD, you only have to pay income tax if your total interest income from different sources in a year is more than Rs. 5,000

5. Premature withdrawal

Foreclosure of the NSC is only possible in case of the following:

  • The holder expires
  • A court of law orders its withdrawal
  • A gazetted government officer forfeits the scheme

What to Choose Between NSC and FD?

You will get the face value of the certificate if withdrawn within a year. If you choose to withdraw after one year, but before three years, you will receive the face value and simple interest on the invested amount.

On the other hand, an FD can be prematurely withdrawn at any time against a minimal charge.

Our FD Calculator can help you gauge the exact returns on your investment before you start investing, thereby allowing you to plan your investments in the best possible manner.

FD Vs NSC Faq’s

Is Fd better than NSC?

While both fixed deposits and NSCs have good investment potential, the potential greater returns on NSCs makes them the apparent first choice, especially since they come with a no-frills tax exemption, which protects the returns. Fixed deposits, on the other hand, can be useful when liquidity is a top priority. As a result, it's a good idea to set away a lump sum in NSCs for something truly special, such as a dream wedding. Fixed deposits, on the other hand, may be the best alternative for the following round of tuition costs or your next automobile.

Is NSC interest rate fixed for 5 years?

The maturity time for NSC is set at five years. The purchase of NSCs has no upper limit, but only investments of up to Rs. 1.5 lakh qualify for a tax credit under Section 80C of the Income Tax Act. The certificates pay a fixed rate of interest, which is presently 1%.

Is NSC taxable after maturity?

On maturity, NSC is paid, which comprises both the invested amount and the interest received. The first investment is tax-free if you claim a deduction under section 80C.

Is interest on NSC is tax-free?

Interest earned on an NSC is taxable as income from other sources. However, because interest is reinvested for the first four years, it can be claimed as a deduction under Section 80C of the Internal Revenue Code. The final year's interest, i.e. the fifth year's interest, is taxable depending on your tax bracket.

NSC vs FD vs PPF





Loan/ Overdraft


6.8% p.a.

5 Years

No (Only interest accrued on maturity is taxable)



7.75% p.a.

5 Years

TDS is deducted at 10% on the interest earned.



7.1% p.a.

15 Years