NSC or Tax Saver FD?

POSTED BY Ram ON March 10, 2011 6:14 pm COMMENTS (3)

Considering post-tax returns for someone in the lowest tax bracket, is it better to invest in National Savings Certificate (NSC) or Tax Saving Fixed Deposits offered by various banks?

I noted that some public banks offer as high as 9.75% p.a. on tax saver FDs.



3 replies on this article “NSC or Tax Saver FD?”

  1. Ram says:

    Thank you both for your helpful inputs.


  2. ashal jauhari says:

    Dear ram, As of now you are in lower Tax bracket but over the next 5Y period, your income ‘ll increase & I don’t what ‘ll be the rise. There may be a situation that after 2-3 years you are in higher Tax slab than from your current one. Accordingly your post tax return from Bank FDs ‘ll also go down.

    Even If we consider, 20.6% tax slab in future, the adjusted Post Tax return ‘ll still be around 7.74% Not bad at all.

    Invest in Bank Tax saver FDs.



  3. moneysights.com says:

    Hi Ram,

    Someone being in lowest or highest tax-bracket shouldn’t affect the decision-making for tax-saving investment. The only thing you should be sure about is how long you are willing to be ok with your money being locked-in!

    NSC has a lock-in of 6 years while tax-saving FDs have lock-in for 5 years. The interest from both are going to taxed. Why would you want to do that? Instead go for PPF. Ofcourse, your money would be locked-in for longer, but if you are putting or invest a small amount (you mentioned lowest tax-bracket), then chances 5 year or 15 year lock-in will not make much of a difference.

    We would recommend you go for tax-saving MFs. The lock-in is lesser. But ofcouse, the returns are not guaranteed. But chances are very very high that after 5 years, you would be better off with an investment in ELSS made today than tax-saving FD or NSC.

    So, our choice would be tax-saving MFs or PPF or a combination of both. You may want to visit moneysights’ tax-investment planning App for more accurate recos – goo.gl/i2YXf

    Happy tax-saving!


Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today