National Savings Certificate vs Fixed Deposit - A Comprehensive Comparison

When it comes to assured and reliable investment options, National Savings Certificate (NSC) and Fixed Deposit (FD) are two popular choices among Indian investors. Both NSC and FD offer attractive returns with their unique features and benefits. If you are interested to know how viable they are for your portfolio, this blog should help.

Read on as we compare NSCs and FDs to help you make a more informed decision.

Some key metrics are:

1. Safety and Security

Both NSCs and FDs are considered safe investment options. NSCs are issued by the Government of India (GoI), making them a highly secure investment. On the other hand, FDs from reputed financial institutions like ICICI Bank are just as safe due to the Bank's strong financial stability and adherence to regulatory guidelines.

2.  Interest Rates 

NSCs offer fixed interest rates that are determined by the government and remain constant throughout the investment tenure. In contrast, FDs provide the advantage of competitive interest rates that are subject to periodic revisions based on market conditions. These revisions do not affect an FD during its tenure. They often have the potential to earn higher returns compared to NSCs, especially when interest rates are on an upward trend.

3.  Tax Benefits 

Investments in NSCs are eligible for tax deductions under Section 80C of the Income Tax Act, up to a limit of Rs 1.5 lakh. Although the interest earned is taxable. On the other hand, the interest earned on FDs is taxable as per the investor's income tax slab.

However, ICICI Bank offers the Tax-Saver FD scheme, which provides tax benefits under Section 80C on investments up to Rs 1.5 lakh.

4.  Liquidity 

NSCs have a fixed lock-in period, which means the investment cannot be withdrawn before maturity. However, FDs offer more flexibility in terms of liquidity. While premature withdrawal may invite a nominal penalty, investors can choose FDs with varying tenures to align with their liquidity needs.

5.  Tenure Options 

NSCs have fixed tenure options of 5 years and 10 years. On the other hand, ICICI Bank FDs provide a wide range of tenure options, starting from as short as 7 days and going up to 10 years. This flexibility allows investors to align their FDs with specific financial goals.

6. Compound Interest 

NSCs follow the non-cumulative interest payout method, where the interest is not reinvested. In contrast, banks offer both cumulative and non-cumulative interest payout options. Cumulative FDs reinvest the interest, leading to compounded growth over time.

7.  Senior Citizen Benefits 

Both NSCs and FDs offered by banks such as ICICI Bank have additional benefits just for senior citizens. They can avail higher interest rates as compared to regular investors.

8.  Nomination Facility

Both NSCs and FDs allow investors to nominate beneficiaries. This ensures that the investment proceeds are transferred to the nominated individual in the event of the investor's demise, avoiding legal complications.

Why Fixed Deposits?  

Let us explore the advantages of choosing a Fixed Deposit over a National Savings Certificate and explore additional aspects to consider when making your investment decision.

1. Flexibility in Interest Payouts: 

With ICICI Bank FDs, you have the flexibility to choose between cumulative and non-cumulative interest payouts. Cumulative FDs reinvest the interest, resulting in compounded growth over time. On the other hand, non-cumulative FDs allow you to receive periodic interest payouts at your convenience, making it suitable for regular income requirements.

2. Sweep-in Facility: 

ICICI Bank’s Sweep-in Facility allows you to link your Savings Account with your Fixed Deposit. So even if you don’t want to open an FD, you can still earn great interest on your Savings Account with ICICI Bank. The Money Multiplier provides you the liquidity of a Savings Account and a higher interest rate from an FD. This can be simply done by linking your FD Account with your Savings Account.

This feature optimises your returns while maintaining liquidity. Any surplus funds in your Savings Account are automatically transferred to the linked FD, helping you earn higher interest without compromising accessibility.

3. Dedicated Customer Support: 

ICICI Bank prides itself on providing excellent customer service. Whether you have queries related to FDs, need assistance with online banking or require help with any financial matter, the Bank's dedicated customer support team is available 24x7.

4. Wealth Management Services: 

Apart from FDs, ICICI Bank offers comprehensive wealth management services to cater to all your financial needs. From investment advisory to portfolio management, the Bank's wealth management experts can guide you in creating a well-rounded and diversified investment portfolio.

5. Financial Planning Tools: 

ICICI Bank has a number of financial planning tools and resources that can help you with your investment decisions. These tools offer insights into risk profiling, goal-based planning and asset allocation; empowering you to plan your finances effectively.

Conclusion 

While both NSC and Fixed Deposit offer attractive investment opportunities, choosing an FD does present a greater range of benefits, such as competitive interest rates, flexible tenure options, liquidity and ease of opening. With the added advantage of auto-renewal and tax benefits, an ICICI Bank FD is the preferred choice for investors seeking stability and growth in their wealth.

Always consider your financial goals, risk appetite and investment horizon before making any investment decisions. Consult with a financial advisor to tailor your investment strategy and make the most of the opportunities available to you. Start your FD journey with ICICI Bank today and secure your financial future.

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