Higher Interest Rates on FDs with Tax Exemption: Post Office National Savings Certificate Scheme Offers 7.7% Interest, Learn Its Special Features

If you haven’t yet planned for tax savings for the financial year 2023-24, there is still time, with just 10 days remaining. It’s advisable to start as early as possible.

For those seeking tax exemption, considering the Tax Saving Fixed Deposit (FD) scheme, which offers a National Savings Certificate (NSC) through the postal department, would be beneficial. This scheme provides an annual interest rate of 7.7%. We are here to provide you with more information about this scheme…

Unique Features

When investing in National Savings Certificate (NSC), you can avail tax benefits under section 80C of the Income Tax Act. By investing more than Rs. 1.5 lakh in NSC during the financial year, you can claim tax exemption.

Opening an account for minors is also possible in this scheme. If the child is under 10 years of age, parents can open an account on their behalf. Once the child turns 10, they can operate the account themselves, and upon reaching adulthood, they become fully responsible for the account.

Additionally, individuals aged 18 or above, as well as minors through guardians, can invest in NSC. Joint accounts can also be opened with adults above 3 years of age.

The lock-in period for NSC is 5 years. This means that you won’t be able to withdraw your money until 5 years have passed.

Keep these points in mind before investing:

• If you request premature withdrawal during the lock-in period, you won’t earn any interest on your investment.
• If you expect fluctuating interest rates during the tenure and wish to avail the prevailing rate upon withdrawal, NSC might not be suitable for you.
• Since there is a lock-in period of 5 years, you won’t be able to access your funds for up to 60 months. Hence, this scheme is not suitable for individuals seeking liquidity within 1-2 years.
  

SBI Offers 6.50% Interest on 5-Year FD

The country’s largest bank, SBI, is currently offering an annual interest rate of 6.50% on its 5-year fixed deposits (FDs), which is lower than the interest offered on NSC. Similarly, Punjab National Bank (PNB) is also offering 6.50% annual interest on 5-year FDs.

Tax Benefits on 5-Year FDs

You can also avail tax benefits on 5-year FDs. Under section 80C of the Income Tax Act, you can claim a deduction of up to Rs. 1.5 lakh from your total taxable income. To put it simply, you can reduce your taxable income by up to Rs. 1.5 lakh through section 80C.