A 5-year Fixed Deposit (FD) is known as a Tax-Free FD. Many people use it to avoid paying taxes.
But the Post Office offers a scheme that not only saves you taxes but also gives you better interest than a 5-year FD.
It’s called the National Savings Certificate (NSC) of the Post Office, which works like an FD where you deposit money for 5 years.
Currently, it gives an interest rate of 7.7 percent. Let’s learn more about this scheme.
First, let’s see where you can get the highest interest on a Tax-Free FD
Post Office: 7.5 percent
State Bank: 6.5 percent
Punjab National Bank: 6.5 percent
Bank of India: 6.5 percent
HDFC: 7 percent
ICICI: 7 percent
You can also invest in NSC in your child’s name
Any Indian citizen can invest in NSC. If you want to open an account for your child, you can do so.
Children above 10 years old can also buy NSC in their own name. Joint accounts are also allowed for two or three people.
Now, let’s talk about how much you can invest
You can start with a minimum of Rs 1000 in NSC and then add more in multiples of Rs 100. There’s no maximum limit for investment.
This scheme matures in 5 years. The interest is calculated annually and you’re guaranteed returns.
The interest rate remains the same throughout the 5 years, even if the rate changes later.
You can also get tax exemption
You can claim tax exemption under Section 80C on the amount you deposit in NSC, up to Rs 1.50 lakh every year.
But unlike other schemes, you can’t withdraw any amount before 5 years. You’ll get the full amount only after 5 years.
Premature closure is allowed only in special situations like death of the account holder, seizure by a Gazetted Officer, or court orders.
If you want to continue NSC for another 5 years after maturity, you need to apply again. The interest will be based on the new certificate’s interest rate.
