Post Office’s two most popular saving schemes – Time Deposit (FD) and National Savings Certificate (NSC), both schemes are excellent and 100% safe in their own places.
But which scheme will prove better for you, depends on your need. Know the comparison of both the schemes here, then decide where you should invest your money.
Whenever it comes to safe investment, the name of post office definitely comes up. The schemes here are guaranteed by the government, so there is no risk of money sinking. For this reason, post office time deposit (FD) and National Savings Certificate (NSC) have always been the preferred option, especially for people looking for fixed income and guaranteed returns. But which option is better for you depends on different needs. Here, understand every aspect of both the schemes carefully and then decide which scheme can prove to be better for you.
What is Post Office Time Deposit (FD/TD)?
This is just like a bank’s Fixed Deposit (FD). You deposit a lump sum amount for a fixed period and get a fixed interest rate on it. In the post office, it is called Time Deposit (TD). In this, you can invest money for 1, 2, 3 and 5 years.
What is National Savings Certificate (NSC)?
This is also a small savings scheme of the post office, but its main purpose is to save tax along with investment. It is issued in the form of a certificate and its duration is 5 years.
Post Office FD Vs NSC
1. Interest Rate
The interest rates of both the schemes are decided by the government every three months.
Post Office TD (July-September 2025):
- 1 year: 6.9%
- 2 years: 7.0%
- 3 years: 7.1%
- 5 years: 7.5%
NSC (July-September 2025): 7.7%
NSC is slightly better in terms of interest rate.
2. Tax Benefits – (This is the biggest difference)
There is a huge difference between the two schemes in terms of tax.
Post Office TD
Only the money deposited in a 5-year TD is eligible for a deduction of up to Rs 1.5 lakh under Section 80C of the Income Tax Act. There is no tax exemption on 1, 2 or 3-year TD. The interest earned on TD is fully taxable and gets added to your annual income.
National Security Advisory Board
On investment: You get tax exemption under section 80C on an amount up to Rs 1.5 lakh deposited in NSC.
On interest (this is where the real game is)
You do not get the interest on NSC every year, rather it gets reinvested in the principal amount. You also get tax exemption on this reinvested interest under section 80C (within the total limit of Rs 1.5 lakh). Only the interest of the last year i.e. 5th year is taxable.
3. Investment period (Tenure / Lock-in Period)
- Post Office TD: In this you get options of 1, 2, 3 and 5 years. This is more flexible.
- NSC: This comes with a lock-in period of only 5 years.
If you want to invest money for a short period, then Post Office TD is better.
4. How is the interest received (Interest Payout)
- Post Office TD: In this, interest is calculated quarterly, but it is paid annually. If you want, you can get this interest in your post office savings account.
- NSC: In this the interest is compounded annually, but it is paid along with the principal on maturity.
If you want a small income in the form of annual interest, then TD is better. If you want to see the money grow, then NSC is good.
5. Premature Withdrawal
- Post Office TD: You can cancel it after 6 months but there is a penalty on it.
- NSC: It cannot be broken before 5 years. It is allowed only in special circumstances like death of the investor or court order.
- TD is slightly better in terms of liquidity, although there is a penalty.
| Features | Post Office Time Deposit (FD) | National Savings Certificate (NSC) |
| Interest Rate (5 years) | 7.5% | 7.7% |
| Duration | 1, 2, 3, 5 years (flexible) | only 5 years |
| 80C Tax Exemption | Only on 5 year FD | Investment and interest for 4 years |
| tax on interest | Fully taxable | Only the interest of the 5th year is taxable |
| Loan Facility | No | Yes |
| Premature withdrawal | After 6 Months (with Penalty) | very difficult |
Who is better for you?
You should choose NSC if:
- Your main motive is to save tax.
- You are willing to lock your money for 5 years.
- You do not need regular income in between.
- You want to keep the option open to take a loan against it in the future.
You should choose Post Office TD if:
- You have to invest the money for a short period like 1, 2 or 3 years.
- You are taking 5 year TD to save tax, but you need a little more liquidity than NSC.
- You want annual interest on your investment.
Frequently Asked Questions (FAQs)
1. Which will give you more money after 5 years, FD or NSC.
Answer: Since the interest rate on NSC (7.7%) is the same as the interest rate on 5-year TD (7.5%), there is a very small difference in the returns of the two. The interest rate on TD is slightly better because the interest is calculated on a quarterly basis, while in NSC it is calculated annually.
2. Can I invest in these schemes online?
Answer: Yes, if you have an account in India Post Payments Bank (IPPB), then you can invest in both these schemes online from the comfort of your home.
3. Which of the two is more beneficial from the tax point of view.
Answer: Without any doubt, NSC is much more beneficial for saving tax because along with the investment, it also provides the benefit of 80C on the interest for 4 years.
4. Is TDS deducted on both the schemes?
Answer: TDS is deducted if the annual interest received from post office TD is more than Rs 40,000 (Rs 1,00,000 for senior citizens). NSC interest is received on maturity, so TDS is not deducted on it, but it is added to your income and is taxable.
