Post Office FD vs NSC: Which investment option can offer higher returns on Rs 5 lakh, Rs 7 lakh in 5 years?

For risk-averse investors seeking secure returns, the National Savings Certificate (NSC) and Post Office Fixed Deposit (FD) or Time Deposit (TD) are two prominent options. Both are government-backed schemes offering fixed returns. But which one delivers better maturity value? Let’s compare them for investments of Rs 5 lakh, Rs 7 lakh over five years.

National Savings Certificate (NSC)

• Interest Rate: 7.7% per annum, compounded annually but paid at maturity.
• Minimum Investment: Rs 1,000 (in multiples of Rs 100); No upper limit.
• Tax Benefits: Eligible for deduction under Section 80C of the Income Tax Act.
• Maturity Period: Five years from the date of investment.
• Premature Withdrawal: Allowed only in case of account holder’s death, court order, or forfeiture by a pledgee who is a gazetted officer.
• Pledging: Can be pledged as security to banks, cooperative societies, and government institutions.

Maturity Value for NSC Investments

Rs 5 lakh: Grows to Rs 7,24,517 (Interest earned: Rs 2,24,517)
Rs 7 lakh: Grows to Rs 10,14,324 (Interest earned: Rs 3,14,324)

Post Office FD

• Interest Rate: 7.5% per annum, payable annually but calculated quarterly.
• Minimum Investment: Rs 1,000 (in multiples of Rs 100); No maximum limit.
• Tax Benefits: 5-year TD qualifies for deduction under Section 80C.
• Maturity Period: 5 years (option to extend).
• Premature Withdrawal: Allowed after 6 months but with reduced interest.
• Pledging: Can be pledged as security to banks and financial institutions.

Maturity amount for Post Office 5-year fixed deposit

• Rs 5 lakh: Grows to Rs 7,24,974 (Interest earned: Rs 2,24,974)
• Rs 7 lakh: Grows to Rs 10,14,324 (Interest earned: Rs 3,14,324)

Which investment scheme offers higher returns?

For investments of Rs 5,00,000 and Rs 7,00,000, both schemes provide similar maturity values, with the fixed deposit slightly ahead. However, NSC offers compounding benefits, making it more advantageous for those reinvesting the maturity amount. Additionally, NSC does not offer periodic payouts, whereas FD provides annual interest payments, making it suitable for those seeking yearly returns.

NSC vs FD

• Choose NSC if you prefer compounded returns and do not need interim payouts.
• Opt for Post Office fixed deposit (FD) if you need annual interest payouts or plan to reinvest.
• Both options offer risk-free, government-backed returns, making them ideal for conservative investors looking for stability and tax benefits.