NSC vs FD Calculator

It depends on the FD rate your bank offers and your tax slab. NSC currently offers 7.7% (FY 2025-26) with annual compounding and a 5-year lock-in. If your bank FD rate is below 7.7%, NSC gives better pre-tax returns. However, NSC has a unique 80C advantage — the reinvested interest (years 1-4) also qualifies for Section 80C deduction, effectively giving a double tax benefit. For someone in the 30% tax bracket, NSC's effective post-tax return can be significantly higher than an equivalent FD, even if the FD rate is slightly higher.

NSC offers a unique double deduction under Section 80C. When you invest in NSC, the principal qualifies for 80C deduction (up to ₹1.5 lakh). The interest earned each year is deemed to be reinvested in NSC, and this reinvested interest also qualifies for 80C deduction in years 1 through 4. Only the 5th year's interest (which is paid out at maturity) does not get reinvested, so it doesn't qualify for 80C. This means your total 80C-eligible amount over 5 years is significantly more than just the principal. No other fixed-income instrument offers this double benefit.

No, TDS is not deducted on NSC interest. The interest is taxable on an accrual basis — you need to declare it in your ITR each year, but no tax is deducted at source. For FDs, banks deduct 10% TDS if total interest across all FDs in a bank exceeds ₹40,000 per year (₹50,000 for senior citizens). If you don't file Form 15G/15H and your interest exceeds the threshold, TDS will be deducted from your FD. This gives NSC a cash-flow advantage — you have the full amount working for you until you file your tax return.

NSC cannot be prematurely encashed except in extreme circumstances — death of the holder, court order, or forfeiture by a pledgee. There is no premature withdrawal facility for general investors. FDs can be broken before maturity at most banks, though you will lose 0.5-1% of the applicable interest rate as a penalty. Some banks offer no-penalty premature withdrawal on specific FD products. If liquidity is important to you, FD is the better choice. NSC should only be considered if you are certain you won't need the money for 5 years.

NSC is backed by the Government of India (sovereign guarantee) — there is zero default risk. Bank FDs are insured by DICGC up to ₹5 lakh per depositor per bank. If a bank fails, you are guaranteed only ₹5 lakh. For amounts above ₹5 lakh, NSC is strictly safer. However, for amounts under ₹5 lakh in a well-established bank, the risk difference is negligible. If you are investing a large amount (say ₹10-50 lakh) and safety is paramount, NSC is the better choice, though you will need to manage the liquidity constraint.