Senior citizens who want to get a stable return from their investments invest in fixed income schemes such as fixed deposits and the National Savings Certificate (NSC). In both investments, they get return at the locked-in interest rate. While the maturity period of an FD is five years, FDs can have a maturity period of 7 days to 10 years.
But if you are a senior citizen who wants to invest Rs 2.5 lakh in a fixed income scheme for five years, where can you get a higher maturity amount- NSC or bank FDs? Will there be tax benefits on investing in the NSC or a bank FD? Will your interest earnings from both be taxed? In this write-up, we will calculate the maturity amount on Rs 2.5 lakh investment in the NSC and a 5-year senior citizen FD from State Bank of India (SBI), Punjab National Bank (PNB), HDFC Bank, ICICI Bank, and others. We will also talk about tax benefits on investment in both schemes and tax treatment of interest earnings.
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Rs 7 lakh investment in SCSS vs SBI senior citizen FD: How much quarterly amount can senior citizens get for 5 years in each scheme?Here is a look at the estimated returns senior citizens could earn from the NSC and bank FDs on a Rs 2.5 lakh investment for five years.
On an investment of Rs 2.5 lakh, the NSC offers a maturity amount of Rs 3,62,258 at an interest rate of 7.7%. It means that you earn Rs 1,12,258 in interest over the investment period. In the 5-year SBI FD, senior citizens can have a maturity value of Rs 3,54,565 and interest earnings of Rs 1,04,565.
PNB offers a maturity amount of Rs 3,51,097, with interest earnings of Rs 1,01,097. HDFC Bank's FD offers a maturity amount of Rs 3,46,807, with interest earnings of Rs 96,807.
ICICI Bank's FD for senior citizens will grow to Rs 3,53,695, earning Rs 1,03,695 in interest in five years, while Axis Bank offers a maturity amount of Rs 3,58,065, with interest earnings of Rs 1,08,065 at the rate of 7.25%.
NSC vs 5-year bank FD: Estimated interest and maturity on Rs 2.5 lakh investment
| Scheme | Interest rate | Estimated interest earned | Estimated maturity |
| NSC | 7.70% | ₹ 1,12,258 | ₹ 3,62,258 |
| SBI FD | 7.05% | ₹ 1,04,565 | ₹ 3,54,565 |
| HDFC Bank FD | 6.6% | ₹ 96,807 | ₹ 3,46,807 |
| ICICI Bank FD | 7% | ₹ 1,03,695 | ₹ 3,53,695 |
| Axis Bank FD | 7.25% | ₹ 1,08,065 | ₹ 3,58,065 |
| Kotak Mahindra Bank FD | 6.75% | ₹ 99,375 | ₹ 3,49,375 |
| PNB FD | 6.85% | ₹ 1,01,097 | ₹ 3,51,097 |
| Bank of India FD | 6.75% | ₹ 99,375 | ₹ 3,49,375 |
| Central Bank FD | 6.5% | ₹ 95,105 | ₹ 3,45,105 |
Bank FD rate source: Paisabazaar
What is the NSC?
The National Savings Certificates (NSC) is a popular government-backed small savings scheme that offers an investment option to individuals looking for fixed income and tax benefits on deposits and earnings. The scheme is run by post offices across India. The NSC is designed to encourage long-term savings with a fixed maturity period of five years.
Tax benefits in NSC vs 5-year FD
The NSC and 5-year tax saver FD qualify for a tax deduction of up to Rs 1.5 lakh on deposits in a financial year under Section 123 of the Income-ax Act, 2025. However, this benefit is allowed only to old tax regime taxpayers. Also, tax benefit on deposits is not available on FDs up to 5 years of duration, or if someone withdraws their investment from an FD before five years.
The tax treatment of interest earnings differs in the NSC and the FD.
Taxation on FD interest earnings
Depending on an investor's income bracket, interest generated on FDs is fully taxed. However, banks cut the TDS on the income from FDs when interest payable or reinvested per senior citizen customer exceeds Rs 1,00,000- in a financial year. For a general customer, the same limit is Rs 50,000.
NSC interest taxation
Interest earned is taxable, but it is deemed reinvested (except for the last year), making it eligible for a deduction under Section 123 of the Income-ax Act, 2025. The interest earned in the fifth year is taxable and must be reported in your income tax return under the head ‘Income from Other Sources’.