When investing in guaranteed return schemes, State Bank of India’s (SBI) 5-year Fixed Deposit (FD) and the National Savings Certificate (NSC) are two of the most preferred choices among risk-averse investors. Both schemes offer assured returns and tax benefits under Section 80C of the Income Tax Act.

This article compares SBI’s 5-year fixed deposit and NSC to determine which investment offers higher maturity returns over five years for investments of Rs 4,00,000, Rs 6,00,000 and Rs 8,00,000.

SBI Fixed Deposit (FD): Features, interest rates and benefits

SBI Fixed Deposits (FDs) are secure savings schemes that allow investors to earn interest at a fixed rate over a specified tenure. The bank offers different FD schemes, including tax-saving fixed deposits, NRI fixed deposits, and regular term deposits.

Key features of SBI Fixed Deposits

• Fixed interest rates ensure predictable returns.
• Investors can choose from various tenures ranging from 7 days to 10 years.
• The 5-year tax-saving FD qualifies for Section 80C tax benefits, reducing taxable income.
• SBI allows premature withdrawals, but with applicable penalties.

Also Read: SIP vs FD: What will be your return on Rs 6,50,000 investment in 10 years?

SBI Fixed Deposit interest rates for a 5-year investment

• General Public: 6.50% per annum
• Senior Citizens: 7.50% per annum

SBI FD maturity value for 5 years

For a 5-year SBI Tax-Saving FD at 6.50% per annum, the estimated maturity values are:

What will be your return on Rs 4,00,000 investment?

• Estimated interest earned: Rs 1,52,168
• Total maturity value: Rs 5,52,168

What will be your return on Rs 6,00,000 investment?

• Estimated interest earned: Rs 2,28,252
• Total maturity value: Rs 8,28,252

What will be your return on Rs 8,00,000 investment?

• Estimated interest earned: Rs 3,04,336
• Total maturity value: Rs 11,04,336

National Savings Certificate (NSC): Features, interest rates and benefits

The National Savings Certificate (NSC) is a government-backed savings scheme designed for individuals seeking safe and high returns. It offers fixed interest rates and compounded annual growth, making it a lucrative option for long-term investors.

Key Features of the National Savings Certificate (NSC)

• Fixed interest rate of 7.7% per annum, ensuring stable returns.
• Interest is compounded yearly but paid only at maturity.
• Minimum investment starts at Rs 1,000, with no upper limit.
• Qualifies for Section 80C deductions, reducing taxable income.
• Premature withdrawals are not allowed except under special circumstances.

NSC maturity value for 5 years

For a 5-year NSC investment at 7.7% per annum, the estimated maturity values are:

What will be your return on Rs 4,00,000 investment?

• Estimated interest earned: Rs 1,79,614
• Total maturity value: Rs 5,79,614

What will be your return on Rs 6,00,000 investment?

• Estimated interest earned: Rs 2,69,420
• Total maturity value: Rs 8,69,420

What will be your return on Rs 8,00,000 investment?

• Estimated interest earned: Rs 3,59,227
• Total maturity value: Rs 11,59,227

SBI 5-Year FD vs NSC: Which investment offers higher interest rates?

SBI’s 5-year FD offers an interest rate of 6.50% per annum, while NSC offers a higher rate of 7.7% per annum. The difference in interest rates makes NSC a better option for maximizing returns over a five-year period.

Maturity Comparison: SBI FD vs NSC for different investment amounts

• For an investment of Rs 4,00,000, SBI FD offers a maturity value of Rs 5,52,168, while NSC offers Rs 5,79,614, resulting in a higher return of Rs 27,446.
• For an investment of Rs 6,00,000, SBI FD offers a maturity value of Rs 8,28,252, whereas NSC provides Rs 8,69,420, leading to a better return of Rs 41,168.
• For an investment of Rs 8,00,000, SBI FD offers a maturity value of Rs 11,04,336, while NSC gives Rs 11,59,227, yielding an additional Rs 54,891.

Tax benefits comparison: SBI FD vs NSC under Section 80C

Both SBI FD and NSC qualify for Section 80C deductions, allowing investors to claim tax benefits on investments up to Rs 1.5 lakh per year. However, the taxation on interest earnings differs:

• SBI FD: The interest earned is taxed annually as per the investor’s income tax slab.
• NSC: The interest is not taxed annually if reinvested, making it more tax-efficient.

Liquidity and premature withdrawal rules: SBI FD vs NSC

• SBI FD allows premature withdrawal, but a penalty is charged for early exit.
• NSC does not permit premature withdrawals before five years except in specific situations such as the account holder’s death, forfeiture by a pledgee or a court order.
• Both SBI FD and NSC can be pledged as collateral for loans.
• SBI FD is more liquid since investors can withdraw early, whereas NSC requires a lock-in period of five years.

Should you invest in SBI FD or NSC for 5 years?

• NSC is the superior option for investors looking for higher guaranteed returns and better tax efficiency. With a 7.7% per annum interest rate, NSC outperforms SBI FD in terms of maturity value.
• SBI FD is a better choice for investors who prioritise liquidity and early withdrawal options. It provides moderate returns but allows flexibility in case of emergencies.