NSC Vs FD

National Savings Certificates (NSCs) and Fixed Deposits (FDs) are both investment options in India that offer guaranteed returns. If you are looking for low-risk ways to grow your money, then National Savings Certificates (NSCs) and Fixed Deposits (FDs) are two attractive options for you.

National Savings Certificates are issued by the Government of India and backed by its sovereign guarantee. They offer a fixed interest rate for investment tenures of 5 or 10 years. Fixed Deposits, on the other hand, provide a fixed interest rate for a chosen tenure, ranging from a few days to several years. NSCs typically offer a slightly higher interest rate compared to FDs.

Difference Between NSC & FD

Choosing between National Savings Certificates (NSCs) and Fixed Deposits (FDs) should depend on your investment goals. Although they offer guaranteed returns, they differ in flexibility, tax treatment, and interest rate.

National Savings Certificate

National Savings Certificates (NSCs) are fixed-income investments offered by the Indian government. They function like government bonds, providing guaranteed returns for 5 at a competitive rate (currently 7.7% p.a.).

NSCs are low-risk and offer tax benefits on interest earned. With a minimum investment of Rs. 1,000 (no upper limit), they suit investors seeking secure growth. However, NSCs lack liquidity and early withdrawals incur penalties.

NSC Eligibility

If you’re considering investing in NSCs, then you should know about the eligibility criteria and see if you are eligible. Here is the list of eligibility criteria for investing in the National Savings Certificate.

• Resident Indian: Only Indian citizens residing in India can apply for NSC. Non-resident Indians (NRIs) are not eligible for new investments. However, existing NRIs who held NSCs before becoming NRIs can continue to hold them till maturity.
• Individuals: The investment can be made by individuals either singly or jointly (up to three adults).
• Guardians: Guardians can invest in NSC on behalf of a minor or someone considered unsound mind. Minors above 10 years old can also be joint holders with a guardian.

Note: Trusts, Hindu Undivided Families (HUFs), and private and public limited companies cannot apply for NSC.

Features of National Savings Certificate

Before investing in a scheme, you should understand and check if the scheme features align with your investment goals. The table below provides the primary features of the National Savings Certificate to help you make a well-informed investment choice.

Fixed Deposit

A fixed deposit (FD) is a savings account offered by banks and other financial institutions that allows you to invest a lump sum of money for a predetermined period at a fixed interest rate.

The interest you earn on an FD can be paid out in different ways. You can choose to receive it monthly, quarterly, or annually, or you can let it compound in your FD and earn interest on interest.

Eligibility to Open an FD Account

The eligibility criteria to open an FD account typically vary depending on the bank and the type of FD account you choose. Here’s a list of requirements to open a Fixed Deposit account.

• Resident Indian citizens: Anyone with valid Indian citizenship can open an FD account.
• Minors: Minors can open FDs through their legally appointed guardian. There might be age and minimum deposit amount restrictions depending on the bank.
• Non-Resident Indians (NRIs): NRIs can also open FDs. You’re right about the two main types of FD accounts for NRIs:
  • Non-Resident External (NRE) FD (NRIs to deposit funds earned abroad).
  • Non-Resident Ordinary (NRO) FD (NRIs to deposit funds earned in India).
• Other Entities: Hindu Undivided Families (HUFs), Sole proprietorship firms, Partnership firms, Limited companies, Trusts, and Government departments can open an FD account.

Features of Fixed Deposit

FDs provide a secure way to save money while earning guaranteed returns. But before investing your lump sum in FD, you should know about the primary features of Fixed Deposits.

Similarities Between NPS and FD

NPS focuses on long-term retirement savings with market-linked returns, while FDs offer guaranteed returns with a fixed tenure. However, there are some primary similarities between NSC and FD.

• Low minimum investment: Both NPS and FDs can be started with relatively low minimum investments.
• Potential for tax benefits: Both NPS and FDs offer some tax benefits in India. NPS contributions qualify for deduction under Section 80C (up to Rs. 1.5 lakh), and interest earned on tax-saving FDs is also partially tax-exempt.

Note: These similarities are overshadowed by the significant differences between the two options, such as risk profile, return potential, and investment horizon.

Compare NSC with other investment options from below:

Steps to Open an NSC Account

Here are the steps to open the National Savings Certificate account and start investing.

• Step 1: Collect the NSC application form. You can download the form online or from any post office branch.
• Step 2: Fill out the form. Provide your personal details, nominee information (person who receives the money if you die), and investment amount (minimum Rs. 100).
• Step 3: Submit the form with KYC documents. Self-attested copies of KYC documents (ID proof, address proof) are required along with the original documents for verification.
• Step 4: You can pay through cash or cheque for the investment amount.
• Step 5: Once processed, the post office will issue you an NSC certificate as proof of your investment.

Steps to Open an FD Account

Opening an FD account is a secure way for investors to deposit their funds and earn guaranteed returns. There are two main ways to open a Fixed Deposit (FD) account in India: Through a bank branch or a bank website.

Open FD by Visiting a Bank Branch

• Step 1: Research and compare interest rates offered by different banks.
• Step 2: You’ll typically need ID proof, address proof, and bank account details.
• Step 3: Go to your chosen bank branch and inform them about your intention to open an FD.
• Step 4: The bank will provide you with an FD application form.
• Step 5: Fill it out and submit the completed application form along with your KYC documents and the investment amount.
• Step 6: The bank will process your request and open your FD account.
• Step 7: You’ll receive a confirmation receipt with details like FD account number, maturity date, and interest rate.

Open an FD Online

• Step 1: Access your bank’s Internet banking portal using your login credentials.
• Step 2: Search for the “Fixed Deposits” or “Deposits” section within the net banking menu.
• Step 3: Select the desired FD type (regular, tax-saving) and choose your preferred investment tenure.
• Step 4: Enter the amount you wish to deposit in the FD.
• Step 5: Carefully review the details like interest rate, maturity date, and nominee information.
• Step 6: The amount will be debited from your existing savings account and the FD account will be created.
• Step 7: You’ll receive a confirmation with FD details.

Besides NSC & FD , you can also check and invest in other saving schemes with better returns. Check the table below with links for details: