Should you invest in a fixed deposit or a National Savings Certificate?

A National Savings Certificate (NSC) is an investment instrument offered by the Indian government. They are a part of the Indian Postal Service’s postal savings scheme and come in two forms, NSC VIII and NSC IX.
Fixed Deposits, also known as Term Deposits, are offered by banks and NBFCs with different rates of interest.
To decide which investment instrument is better, have a look at their respective benefits and features:

Features and benefits
Here’s a brief lowdown on the features and benefits of FDs and NSCs:

1. Tenor
NSCs come with tenors of 5 years or 10 years. 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 a rate of interest, going up to 6.8% and compounded annually.
With Bajaj Finance Fixed Deposit, you can get interest rates up to 6.50%. You can avail of an additional 0.25% if you’re a senior citizen investing in a Senior citizen FD.

3. Loan
You can get a loan against both NSCs and FDs. With Bajaj Finance, you can get a loan up to 75% of your FD amount.

4. Tax benefits
The interest you earn from an NSC is exempted from income tax under Section 80C. With an FD, you must only pay income tax if your total interest income from different sources in a year is more than Rs. 10,000.

5. Premature withdrawal
The NSC will be foreclosed in case of the following:
• The holder expires
• A court of law orders its withdrawal
• A gazetted government officer forfeits the scheme

You will get the face value of the certificate, if withdrawn within a year. If you choose to withdraw after 1 year but before 3 years, you will receive the face value and simple interest on the invested amount.
On the other hand, an FD can be prematurely withdrawn after the initial lock-in period of 3 months, against a minimal charge.
Considering NSC vs FD, you can get more benefits with an FD. You can start investing in a Bajaj Finance FD with a minimum deposit of Rs. 25,000. Our FD Calculator can help you gauge the exact returns on your investment, even before you choose to invest. This facility can help you plan your investments ahead of time in an efficient way.