Whenever it comes to investing money safely and earning returns, people often consider Fixed Deposits (FDs). By investing in FD schemes offered by various banks and financial institutions across the country, you can earn returns ranging from 4.5% to 8.25% per annum. Additionally, you can save tax by investing in a 5-year term FD scheme.
Along with FDs, National Savings Certificates (NSC) also provide a secure investment option with great returns. But what are the benefits of investing in FD and NSC, and which option offers higher interest? Today, we will explore these questions and compare both options.
How Much Interest Do You Get on a 5-Year FD?
A 5-year Fixed Deposit (FD) not only offers secure investment but also provides tax-saving benefits. Various banks offer attractive interest rates for a 5-year FD scheme. Currently, the following banks are offering the following interest rates for a 5-year FD:
- State Bank of India (SBI): 6.50% per annum
- Union Bank of India: 6.50% per annum
- Punjab National Bank (PNB): 6.50% per annum
- HDFC Bank: 7.00% per annum
- ICICI Bank: 7.00% per annum
- Yes Bank: 7.25% per annum
Additionally, by investing in a 5-year FD, you can save up to ₹1.5 lakh under Section 80C of the Income Tax Act.
How Much Interest Do You Get in NSC?
The National Savings Certificate (NSC) is another popular investment scheme offered by the Indian Post Office. Currently, the interest rate for NSC is 7.70% per annum. One of the main advantages of NSC is that it offers guaranteed returns, with the interest being compounded annually, but paid out only at maturity.
Investments in NSC can begin with as little as ₹1,000, and like FDs, you can claim tax benefits under Section 80C of the Income Tax Act.
FD vs. NSC: Key Comparisons
- Interest Rate: NSC offers a higher interest rate of 7.70%, while FDs offer varying rates, with the highest being 7.25%.
- Tax Benefits: Both schemes offer tax savings under Section 80C, with FD investments being eligible for a tax deduction of up to ₹1.5 lakh.
- Liquidity: FDs offer more liquidity as you can withdraw the money earlier (though it may incur penalties), while NSC locks your investment for 5 years.
- Taxation on Interest: Interest earned on both FD and NSC is taxable, but the interest on NSC is taxed at maturity, unlike FD interest, which is taxed annually.