Fixed deposits and National Savings Certificates (NSCs) are both low‑risk instruments but differ in tenure, tax treatment and liquidity. FDs are offered by banks and can have tenures from a few days to ten years. NSCs are government‑backed certificates with a fixed five‑year tenure. As of July 2025, NSCs offered 7.7 % annual interest, compounded annually. Investors can claim up to ₹1.5 lakh under Section 80C for both FDs (tax‑saving FDs) and NSCs, but early withdrawal from an NSC is generally not allowed, whereas premature FD closure is possible with penalty.
FD vs. NSC at a Glance
| Attribute | Fixed Deposit | National Savings Certificate (NSC) |
|---|---|---|
| Tenure options | 7 days – 10 years depending on bank | Fixed 5 years |
| Interest rate | Varies by bank (~6–7.5 %) | 7.7 % p.a. (July 2025) |
| Compounding | Usually quarterly or cumulative | Annually |
| Liquidity | Premature withdrawal allowed with penalty | Early withdrawal not permitted except in select cases |
| Tax benefit | Tax‑saving FD eligible for 80C (5‑year lock‑in) | Principal qualifies for 80C; interest taxable in the year of receipt |
Choose between FDs and NSCs based on your required lock‑in period and tax planning. FDs offer flexible tenures and easier access, while NSCs provide a fixed rate backed by the Government of India.
