The National Savings Certificate (NSC) offered by the Indian Postal Service, fixed deposits (FDs) offered by banks, and post office term deposits (POTD) are all types of savings and investment options. However, they have different features and may be better suited for different types of investors.
National Savings Certificate (NSC) is a type of savings bond that offers a fixed rate of interest and can be purchased from any post office. It has a maturity period of 5 years and offers tax benefits under Section 80C of the Income Tax Act. The interest earned on NSC is taxable as per the income tax slab of the investor.
A Fixed Deposit (FD) is a type of savings account offered by banks, where the investor deposits a lump sum of money for a fixed period of time, typically ranging from 7 days to 10 years, and earns a fixed rate of interest on the deposit. The interest earned on FDs is taxable as per the income tax slab of the investor.
Post Office Time Deposits (POTD) are similar to bank fixed deposits, but are offered by the Indian Postal Service. They have a minimum deposit amount of Rs.200 and have a maturity period of 1,2,3 and 5. The interest earned on POTD is taxable as per the income tax slab of the investor.
All three options (NSC, FDs, and POTD) are low-risk investments and offer a fixed rate of interest. NSCs offer tax benefits under Section 80C of the Income Tax Act, while FDs and POTD do not unless they are of 5 years duration. Some banks also issue special 80C FD. NSCs have a maturity period of 5 years, while FDs and POTD have a range of maturity periods but for this example we will make a comparison with the Bank FD’s and Post Office TD having a duration of 5 years.
Ultimately, the choice between these options will depend on your investment goals, risk tolerance, and tax situation. It is recommended that you consult a financial advisor to understand which option is best suited for your needs.