NSC or post office RD: Which is better for savings?
What's the story
The National Savings Certificate (NSC) and Post Office Recurring Deposit (RD) are two popular savings schemes in India. Both offer fixed returns and are backed by the government, making them safe options for investors. However, they differ in terms of investment amount, tenure, and interest rates. Understanding these differences can help you choose the right option for your financial goals. Here's a look at both.
#1
Investment amount and flexibility
NSC requires a minimum investment of ₹1,000 with no upper limit. It is ideal for those who want to invest a lump sum. On the other hand, Post Office RD allows you to start with as little as ₹100 per month. This makes it more flexible for those who prefer to invest smaller amounts regularly. The choice between them depends on your initial capital and how much you can commit monthly.
#2
Tenure options available
The tenure of NSC is fixed at five years, which means your money will be locked in for this period. However, it offers the option of premature encashment under certain conditions after three years. Post Office RD has a more flexible tenure ranging from six months to 10 years, allowing you to choose based on your financial plans.
#3
Interest rates comparison
As of October 2023, NSC offers an interest rate of 7.7% per annum, compounded annually. Post Office RD offers a slightly lower rate of 7.5% per annum, compounded quarterly. While NSC offers higher returns due to annual compounding, Post Office RD's quarterly compounding can still yield decent returns over time.
Tip 1
Tax implications and benefits
Investments in NSC qualify for tax deductions under Section 80C up to ₹1.5 lakh per financial year. This makes it attractive for tax-saving purposes. However, interest earned on NSC is taxable. Post Office RD does not offer tax deductions but has lower tax implications as the interest earned is subject to TDS only if it exceeds ₹10,000 in a financial year.