NSC or Bank FD
To invest in Bank FD or NSC?
Comparison between NSC IX Issue and Bank Fixed Deposit (With no tax saving benefits) , which is better in current market.
NSC 9th Issue certificate are introduced form 1-12-2011. Details of NSC 9th Issue
National Saving Certificate (NSC) IX Issue is smart option to save/invest in current market situation. It assures return of 8.7% compounded annually for the period of 10 years. Deposit of Rs.100/- will fetch sum of Rs.234.35 in ten year.
In case of fixed deposit banks do not accept long term deposits. In current market banks are offering interest of 8.5% to 9.5% p.a. As per guidance available, bank rates have peaked up and may fall in future. In case of NSC 9th issue interest is fixed for 10years. In case there is increased in interest rate of NSC 10th Issue anytime, the amount can be withdrawn without loss of interest* and reinvested in fresh NSC Certificate at higher rate.
Also there is not TDS/withholding tax on interest received from NSC 9th Issue. Tax is payable (if any) by investor at time of filing the return. In case TDS is deducted on bank fixed deposit, then the interest accrued is lesser by % of TDS and value of maturity amount is reduced.
Please note no income tax deduction benefit is available on both the deposits. No deduction is available on payment of amount or on receipt of interest
*No interest earned if withdrawn in 1st year, interest paid at Post Officer Saving rate if prematurely en-cashed in 2nd and 3rd Year
| Features to Compare | National Saving Certificate (NSC) IX Issue | Bank Fixed Deposit |
| Minimum & Maximum Amount | Any amount can be invested in Denomination of Rs.100, Rs.500/-, Rs.1,000/-, Rs.5,000/- and Rs.10,000/- | No limit |
| Type of Holding | Certificate Type | Deposit Receipt |
| Rate of Return (Interest) | 8.7% compounded half yearly. 134.35% return in 10 years | At present varies form 8.5% to 9.5 % for deposits for 1 to 3 years |
| Tax Benefit | Deduction under Sec80C NOT available | Deduction under Sec80C NOT available |
| Period of Holding | 10 years | to be decided by depositor at time of deposit |
| Premature Encashment | Encashment allowed | Allowed subject to penalty (of 1% ?) |
| Penalty of Premature Encashment | *No interest earned if withdrawn in 1st year, interest paid at Post Officer Saving rate if prematurely en-cashed in 2nd and 3rd Year | Allowed subject to penalty (of 1% ?) |
| Safety and Security | Sovereign Certificate | Insured upto Rs.10,000/- |
| TDS/withholding tax | No TDS | TDS @ 10% (20% of PAN is not furnished to bank) |
Use this link to calculate annual NSC interest accrued
Revised interest rate and maturity value of NSC 8th issued after 1st December, 2011
