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New Delhi: Safe savings and better returns have become the first need of every investor in the era of inflation. After repeated repo rate cuts by the Reserve Bank of India in the last one year, many banks have reduced the interest rates of fixed deposits i.e. FDs. In such a situation, the government's small savings schemes are becoming a better option for the common people. One of these is the National Savings Certificate (NSC). This is a fully government-guaranteed scheme, in which your money remains safe and interest is also paid.
Currently, the government is offering 7.7 percent annual interest on NSC, which is more than the 5-year FD of many big banks. This is why the demand for NSC is increasing rapidly among the middle class and the salaried class. The special thing is that those who opt for the old tax rules i.e. Old Tax Regime also get tax exemption under Section 80C. Therefore, NSC has now become not only a means of saving, but also a strong source of tax planning.
National Savings Certificate is a small savings scheme, which is operated through the post office. It is a safe investment option for a period of 5 years. The money invested in it remains under the guarantee of the government, so the risk is almost zero. The government reviews its interest rates every quarter, so that it remains in line with the market situation.
The minimum investment in NSC is Rs 1,000 and after that you can invest in multiples of Rs 100. There is no limit on the maximum investment. At the same time, the minimum amount in FD can range from Rs 1,000 to Rs 10,000 in different banks. Even in normal FDs, there is no maximum investment limit.
For the January to March 2026 quarter, NSC is getting 7.7 percent annual interest, which is compounded annually. Compared to this, most banks are paying interest on 5-year FDs ranging from 6 percent to 7.5 percent. Talking about government banks, SBI pays 6.05 percent interest on 5-year FDs, Punjab National Bank 6.10 percent and Canara Bank gives 6.25 percent interest. Among private banks, HDFC Bank is paying 6.4 percent interest, ICICI Bank 6.5 percent and Yes Bank 6.75 percent. It is clear that NSC is offering better returns than many banks.
| Bank Name | 5 Year Interest Rate (%) |
|---|---|
| HDFC Bank | 6.4 |
| ICICI Bank | 6.5 |
| IDFC FIRST Bank | 7 |
| IndusInd Bank | 6.65 |
| Jammu & Kashmir Bank | 6.6 |
| IDBI Bank | 6.25 |
| Karnataka Bank | 6.15 |
| Kotak Mahindra Bank | 6.25 |
| YES Bank | 6.75 |
Public Sector Bank FD rates
| Bank Name | 5 Year Interest Rate (%) |
|---|---|
| Canara Bank | 6.25 |
| Central Bank of India | 6 |
| Punjab National Bank | 6.1 |
| State Bank of India | 6.05 |
Interest in NSC is added every year and the entire amount is received after 5 years on maturity. This is called a cumulative scheme. In FD, you get two options. If you wish, you can charge interest every quarter or you can add it to maturity. NSC has a lock-in of five years and money cannot be withdrawn prematurely in general. Withdrawal is possible only by death, court order or under special circumstances. Tax-saver FDs also have a lock-in of five years, whereas normal FDs can be broken prematurely but are subject to penalties.
NSC Tax Benefits
Investment made in NSC is eligible for deduction of up to Rs 1.5 lakh under Section 80C under the old tax rule. However, the interest earned on NSC is taxable. Similarly, the interest earned on FD is also taxable as per your income tax slabs. If you want safe investments and better interest, then at present NSC is proving to be a better option than many bank FDs. It is a robust and reliable tool especially for those seeking tax savings.
