Post office NSC Returns Calculations:
| Year | Compound Interest Tenure (in 6 months) | Principal Amount (in Rs.) | 8% Interest compounded at Tenure period (in Rs) | Overall Interest Earned by the end of Tenure (in Rs.) | Overall Return at the end of Tenure (in Rs.) | Actual (Yield) Interest Earned (in %) | |
| 1 | 1 | 100000 | 4000 | 4000 | 104000 | 4.00% | |
| 1 | 2 | 104000 | 4160 | 8160 | 108160 | 8.16% | |
| 2 | 3 | 108160 | 4326 | 12486 | 112486 | 12.49% | |
| 2 | 4 | 112486 | 4499 | 16986 | 116986 | 16.99% | |
| 3 | 5 | 116986 | 4679 | 21665 | 121665 | 21.67% | |
| 3 | 6 | 121665 | 4867 | 26532 | 126532 | 26.53% | |
| 4 | 7 | 126532 | 5061 | 31593 | 131593 | 31.59% | |
| 4 | 8 | 131593 | 5264 | 36857 | 136857 | 36.86% | |
| 5 | 9 | 136857 | 5474 | 42331 | 142331 | 42.33% | |
| 5 | 10 | 142331 | 5693 | 48024 | 148024 | 48.02% | |
| 6 | 11 | 148024 | 5921 | 53945 | 153945 | 53.95% | |
| 6 | 12 | 153945 | 6158 | 60103 | 160103 | 60.10% | |
| Overall Tax Free Returns After | 6 years | For 100000 Investment is | 60103 | 160103 | 60.10% | ||
Bank Tax Saving Fixed Deposit Returns Calculations:
| Year | Compound Interest Tenure (in 3 months) | Principal Amount (in Rs.) | 8.75% Interest compounded at Tenure period (in Rs) | Overall Interest Earned by the end of Tenure (in Rs.) | Overall Return at the end of Tenure (in Rs.) | Actual (Yield) Interest Earned (in %) | |
| 1 | 1 | 100000 | 2188 | 2188 | 102188 | 2.19% | |
| 1 | 2 | 102188 | 2235 | 4423 | 104423 | 4.42% | |
| 1 | 3 | 104423 | 2284 | 6707 | 106707 | 6.71% | |
| 1 | 4 | 106707 | 2334 | 9041 | 109041 | 9.04% | |
| 2 | 5 | 109041 | 2385 | 11427 | 111427 | 11.43% | |
| 2 | 6 | 111427 | 2437 | 13864 | 113864 | 13.86% | |
| 2 | 7 | 113864 | 2491 | 16355 | 116355 | 16.35% | |
| 2 | 8 | 116355 | 2545 | 18900 | 118900 | 18.90% | |
| 3 | 9 | 118900 | 2601 | 21501 | 121501 | 21.50% | |
| 3 | 10 | 121501 | 2658 | 24159 | 124159 | 24.16% | |
| 3 | 11 | 124159 | 2716 | 26875 | 126875 | 26.87% | |
| 3 | 12 | 126875 | 2775 | 29650 | 129650 | 29.65% | |
| 4 | 13 | 129650 | 2836 | 32486 | 132486 | 32.49% | |
| 4 | 14 | 132486 | 2898 | 35384 | 135384 | 35.38% | |
| 4 | 15 | 135384 | 2962 | 38346 | 138346 | 38.35% | |
| 4 | 16 | 138346 | 3026 | 41372 | 141372 | 41.37% | |
| 5 | 17 | 141372 | 3093 | 44465 | 144465 | 44.46% | |
| 5 | 18 | 144465 | 3160 | 47625 | 147625 | 47.63% | |
| 5 | 19 | 147625 | 3229 | 50854 | 150854 | 50.85% | |
| 5 | 20 | 150854 | 3300 | 54154 | 154154 | 54.15% | |
| 6 | 21 | 154154 | 3372 | 57526 | 157526 | 57.53% | |
| 6 | 22 | 157526 | 3446 | 60972 | 160972 | 60.97% | |
| 6 | 23 | 160972 | 3521 | 64494 | 164494 | 64.49% | |
| 6 | 24 | 164494 | 3598 | 68092 | 168092 | 68.09% | |
| Overall Returns After | 6 years | For 100000 Investment is | 68092 | 168092 | 68.09% | ||
| Tax On Interest (30%) | On the encashment year | For Interest Earned 68092 is | 20428 | 147664 | 20.43% | ||
| Overall Returns | After Tax Deduction | is | 47664 | 147664 | 47.66% | ||
Conclusion:
- PO NSC Effective returns 60.10% at the end of 6 years for a fixed 8% half-yearly compounded interest whereas
- Bank FD yields only 47.66% (though the untaxed yield comes to 68.09%) at 8.75% compounded quarterly
- Don’t Opt for bank Fixed deposits.
Excel Calculation Sheet: NSC-vs-BankFD-Calc
Reference of IT Slabs:
Income Tax Rates/Slabs for A.Y. (2010-11)
| Slab (Rs.) | Tax (Rs.) |
| less than 1,60,000 | Nil |
| 1,60,000 to 3,00,000 | (TI – 1,60,000) * 10% |
| 3,00,000 to 5,00,000 | 14,000 + (TI – 3,00,000) * 20% |
| Greater than 5,00,000 | 54,000 + (TI – 5,00,000) * 30% |
0 thoughts on “Post office NSC vs. Bank Tax Saving Fixed Deposit”
HI. i SAW THIS cmparision. its very good. but nsc interest is also taxable.. but by reinvesting the interest we can avoid tax till 5 th year!! now fd rates are 9.5. still nsc has the upper hand???
pls mail me the reply to my mail id mail2vig2k@yahoo.co.in
compared to tax saving FD (which are still giving 8% interest) NSC would be good. However, if you are not a tax payer/not looking for tax benefit a regular FD are good.