NSC vs FD: National Savings Certificate offers higher interest rate than many leading bank fixed deposits; check list

National Savings Certificate is a popular small savings scheme where investors can invest for a 5-year period. The investment scheme also offers tax benefits under the old tax regime (Section 80C of the Income Tax Act, 1961).

NSC offers a 7.7% interest rate, which is better than 5-year fixed deposit (FD) interest rates that many leading banks offer.
In a scenario where banks have been slashing FD rates following the Reserve Bank of India’s (RBI) frequent repo rate cuts last year, NSC is emerging as an attractive investment option providing a fixed interest rate as high as 7.7%. Know more about the small savings scheme and how NSC’s interest rate compares to the rates of many leading bank FDs.

What is National Savings Certificate (NSC) scheme?

The National Savings Certificate (NSC) is a safe and a government-backed investment option for individuals looking for assured returns and tax benefits. NSC is designed to encourage long-term savings with a fixed maturity period of five years.

The government reviews NSC’s interest rates along with many small savings schemes’ interest rates every quarter.

Also read: Senior Citizen FD Investment: Can you pay zero TDS on Rs 1 lakh+ interest earnings from your fixed deposits?

Minimum and maximum investments in NSC and FD

The minimum investment in NSC is Rs 1,000 and in multiples of Rs 100, while there is no maximum limit.
The minimum investment in an FD can vary from bank to bank. It can be in the range of Rs 1,000 to Rs 10,000, while there is no maximum limit in regular FDs.

NSC Vs FD interest rates

For the January–March 2026 quarter, NSC is offering an interest rate of 7.7% per annum, compounded annually. In comparison, most major banks currently offer fixed deposit interest rates in the range of 6% to 7.5% per annum.
Among public sector banks, SBI offers a 6.05% rate to general citizens on its 5-year FD. Punjab National Bank (PNB) offers a 6.10%, while Canara Bank offers a 6.25% rate on their respective 5-year FDs to general citizens.

For a 5-year general citizen FD, HDFC Bank offers a 6.4% rate, ICICI Bank a 6.5%, and Yes Bank a 6.75%.

PRIVATE SECTOR BANKS	5 year tenure
HDFC Bank	6.4
ICICI Bank	6.5
IDFC FIRST Bank	7
IndusInd Bank	6.65
Jammu & Kashmir Bank	6.6
IDBI Bank	6.25
Karnataka Bank	6.15
Kotak Mahindra Bank	6.25
YES Bank	6.75
PUBLIC SECTOR BANKS
Canara Bank	6.25
Central Bank of India	6
Punjab National Bank	6.1
State Bank of India	6.05

Source- Paisabazaar as on January 7, 2026

NSC vs FD interest calculation

NSC follows the cumulative interest payout method, where the interest is reinvested. Interest in NSC is compounded annually, payable at maturity.

In FDs, banks offer both cumulative and non-cumulative interest payout methods.

While non-cumulative FDs pay the interest amount on quarterly intervals, cumulative FDs reinvest the interest, leading to compounded growth over time.

NSC lock-in period

NSC has a lock-in period of 5 years. Premature withdrawal is not allowed except in cases of certain conditions such as death, court order, etc.

A tax-saver FD also has a mandatory lock-in period of 5 years, where premature withdrawal is not allowed. On the other hand, a regular FD can be withdrawn after paying a penalty.

Tax benefits on NSC deposits under old tax regime

Investments in NSCs are eligible for tax deductions up to Rs 1.50 lakh in a financial year. The tax benefit is available under Section 80C of the Income Tax Act, 1961, only to those who follow the old tax regime .

The interest earned in NSC is taxable.
The interest earned on FDs is also taxable as per the investor's income tax slab.