Skip to content
FD vs NSC: Which is the better investment option?

FD vs NSC: Which is the better investment option?

FD vs NSC: Which is the better investment option?

A Fixed Deposit (FD) and National Savings Certificate (NSC) have assured returns and other similar features. What differentiates them is that an FD has more flexibility in terms of tenure. The initial amount you invest in an NSC will not be taxed. Senior citizens can avail of additional benefits for both these investment schemes.

An NSC is a fixed-income post office savings scheme offered by the government of India. An FD is a popular investment scheme which allows you to invest a lump sum amount with a fixed interest rate and assured returns.

Investment decisions require a good understanding of where you are putting your money. Gold, stocks, fixed deposits, mutual funds, etc., are some of the many options available. With a Shriram FD, you can easily start an account online from the comfort of your home. Shriram FD has been rated "[ICRA]AA+ (Stable)” by ICRA and "IND AA+/Stable" by India Ratings and Research.

While an NSC helps you invest in government savings bonds, an FD lets you earn interest on the deposited money over a fixed term. These investment options offer assured returns, so which one should you consider? Let's take a look at what each option can provide you with:

What is a Fixed Deposit?

A fixed deposit is a popular investment option that provides safe and guaranteed returns on your investments. It can help you save towards future goals. It is also a desirable investment option as it assures the person investing their principal amount. Many banks and NBFCs offer higher interest rates to provide a much-needed opportunity for investors to enhance their financial income easily. 

What is a National Savings Certificate?

An NSC is a fixed income option that you can get at any post office branch. It is a scheme to encourage the primarily low to a mid-income group to save while reducing their tax liability. You can get it for yourself, a minor, or create a joint account at your local post office. Five years is the time set for an NSC. Investments of up to Rs. 1.5 lakh qualify for a tax credit under Section 80C of the Income Tax Act. The purchase of an NSC has no upper limit.

Comparison Between NSC and FD

1. Term

NSCs have a fixed term of 60 to 120 months. This fixed-term limits the options customers can get when choosing an investment period. Some banks or NBFCs offer a lock-in period of a minimum of seven days and can go up to ten years in the case of a fixed deposit.

2. Rate of Interest

The government of India fixes the interest rate for NSCs from time to time, and it is generally higher than the amount available on a fixed deposit. You can check the interest rates for your required FD through the Shriram interest rate charts. In the case of an NSC, the interest rate is computed every six months. The calculations are done for interest rates of fixed deposits every quarter year.

3. Loan Facility

In an emergency, you can use both NSCs and FDs as collateral to secure instant financing. Many banks and NBFCs offer loans against an FD. The facility of loan is unavailable for a five-year tax-saving FD.

4. Tax Benefits

The interest you earn from an NSC will not be taxed. A fixed deposit account with a minimum deposit of five years, also known as a tax-saving FD, can help you save taxes. A tax-saving FD will allow a person to claim deductions of Rs. 1.5 lakhs per year.

5. Taxable Returns

The interest earned on both these investment schemes is taxable. It will not be taxed if you choose to reinvest the interest amount. For senior citizens, if the interest income is more than Rs. 50,000 in a financial year, the interest earned will be taxed.

6. Premature Withdrawal

A premature withdrawal for an NSC will only be possible in specified circumstances. If the holder of the NSC passes away, the court of law orders its withdrawal. If a gazetted government officer forfeits the scheme, it will become eligible for a premature exit. On the other hand, you can break an FD before its term, but the person will have to bear a penalty. Sudden withdrawal will not be allowed for a tax-saving FD.

7. Investment Security

Being a service from the Government of India, NSCs offer rates that rarely change significantly and are the safest possible investment a person can make in India. Investing in a fixed deposit is also a safe option. It may often be safer to invest in FD schemes of the public sector rather than private banks.

Should you invest in NSC or FD?

After fully understanding the pros and cons of investing in either FDs or NSCs, here are some points to help you make the final decision:

1. NSCs have a few advantages over FDs of banks or NBFCs. An NSC offers lower risk and a higher rate of interest.

2. The tax on the interest may be lower than that of an NSC under particular conditions. While comparing the two savings schemes, you need to compare the interest received on the maturity, not just the interest rate.

3. If a senior citizen's income is below the taxable limit, they can avail of a higher interest rate by submitting form 15H. You can replicate several NSC benefits in the fixed deposit of banks or NBFCs.

4. If a person's income falls below the taxable limit and has also submitted Form 15G, then the two investments will be on par with each other.


Considering the above factors, you can now decide whether an NSC or an FD is the best solution for your investment needs. If you are still confused, some elements you can compare is the interest gained on maturity on FD and NSC and not just the rate of interest. If you invest in a Shriram FD, you can avail of competitively higher interest rates. A Shriram fixed deposit also offers flexibility in tenure and can be started by just about anyone with the right documents.


1. Is NSC a good investment?

NSC is a small savings scheme that the Indian government backs. It is a good investment, but compared to an FD, it does not have much flexibility in tenure.

2. Is the NSC interest rate fixed for five years?

Yes. The interest rate of an NSC remains fixed for its entire tenure. An FD also has a fixed interest rate, and you can claim tax deduction with a 5-year fixed deposit.

3. Is NSC taxable after maturity?

The interest earned on a tax-saving FD is taxable after maturity. Only the initial deposit is tax-free.

Key Highlights:

  • Both NSC and FD offer assured returns for your investment.
  • A fixed deposit will have more flexibility in terms of the tenure of the deposit.
  • The initial amount deposited in an NSC will not be taxed.
  • Senior citizens can avail of additional benefits for both NSC and FD accounts.
Shriram completes 50 years of service!

To mark this momentous occasion, we have launched Shriram Jubilee Deposit - a 50-month investment scheme.
Invest now and earn up to 9.20%* p.a. (including 0.50%* p.a. for Senior Citizens and 0.10%* p.a. for Women)

Book a Fixed Deposit & get attractive/ high returns