Interest rate: 7.8% Tenure: 5 years
Unlike the PPF, there is no cap on investments in the NSC. But the interest is fully taxable. The post tax returns to 5.38% in the highest 30% bracket, which is comparable with the returns of bank fixed deposits. The only difference is that the interest accruing on NSCs every year is also eligible for tax deduction. Suppose you buy NSCs worth `50,000 and claim tax deduction this year. The following year, you can claim deduction for the `3,900 that accrues as interest in the first year. In the third year, you can claim deduction for `4,204 as interest gets compounded.
NSCs fell out of favour when bank rates were higher at 9-9.5% a few years ago. But deposit rates have fallen in the past two years and especially after demonetization. Though banks offer senior citizens higher rates, for regular investors the deposit rates are now 7-7.2% (See page 25). This makes the NSCs more attractive. But go for them only if you are ready to stand in long queues at the Post Office and put up with the laxity of the government staff.
Invest Rs 1,50,000 and Save Tax up to Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds. Save Tax Get Rich
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