Safe investment and tax saving options are always in discussion for senior citizens in India. Two popular options are Post Office National Savings Certificate (NSC) and Bank FD Scheme. You can invest in both the schemes for a lock-in period of five years and offer the benefit of saving tax under Section 80C. But it is important to understand which option is more profitable.
What is NSC?
National Savings Certificate (NSC) is a government-backed investment option, designed to provide long-term secure savings and assured returns. It is operated by post offices across India and has a maturity period of 5 years. The biggest advantage of NSC is that the interest rate in it is compound interest. This means that your interest also increases year after year.
What is a 5-year tax-saver FD?
The banks’ 5-year tax-saver FD scheme offers both competitive interest rates and tax benefits to senior citizens. The minimum deposit amount in this FD is Rs 10,000 and maximum Rs 1.5 lakh. Different banks offer different interest rates. For example, SBI is offering 7.05%, ICICI 7.10%, Bandhan Bank 7.25% and IDBI 6.85%.
interest rates comparison
In the October-December 2025 quarter, the NSC interest rate is 7.7% per annum and is compounded. Whereas the interest rate of bank FD is between 6.5% to 7.5%. This makes it clear that NSC can be an option giving slightly higher returns for senior citizens in general.
Tax benefits and taxation
Both investments offer the benefit of tax deduction up to Rs 1.5 lakh under Section 80C. However, taxation on interest income is different. The interest income on FD is fully taxable and TDS is also deducted. The TDS limit for senior citizens is Rs 1 lakh per financial year. Interest earned in NSC is considered reinvested till the last year and can be included in Section 80C for tax savings. Only the interest earned in the fifth year is taxable.
Lock-in period and security
Both the schemes have a mandatory lock-in period of 5 years. NSC is government backed, while bank FD is insured by DICGC up to Rs 5 lakh per bank. This keeps the investment safe and reduces the risk.
What is better for senior citizens?
The interest rate of NSC is slightly higher and it is based on compound interest, which can lead to better returns in the long run. Whereas bank FD may be better in some cases, but it is important to keep TDS and tax rules in mind. Senior citizens should choose the appropriate option between the two as per their investment strategy, tax slab and cash requirement.