Time Deposit vs NSC vs KVP: Benefits And Interest Rates Compared

Due to the lower interest rate regime implied by RBI, most of the banks such as SBI, Kotak Mahindra Bank HDFC Bank, Axis Bank, and Punjab National Bank have recently lowered interest rates throughout various tenures on their FD's. By looking at this scenario a conservative investor can opt for post office small savings schemes which give higher returns and are secure too as compared to the bank FDs. Over the tenure of 5 years the interest rates that are fetching by the top banks currently in India are ranging from 5.30% to 7.25%. While a lump-sum deposit on post office schemes can give you an interest of 7.60% per annum which is compounded yearly.

Holding funds for a longer period helps in a falling interest rate scenario. Many conservative investors who plan to save a lump sum for five years or more can opt from these three small savings schemes offered by the post office. National Savings Certificate (NSC), Kisan Vikas Patra (KVP), and Post Office Time Deposit Account (POTD). The interest is paid annually in the case of POTD, but on the other side interest gets accumulated and is paid on maturity on NSC and KVP. Here we have categorised some important benefits along with the interest rates of National Savings Certificate (NSC), Kisan Vikas Patra (KVP ) and Post Office Time Deposit Account (POTD), through which you can easily consider the best fixed-income investment pool for your lifestyle.

Post Office Time Deposit Account (TD)

Post office time deposit account (TD) is available for term of 1, 2, 3, and 5 years with a minimum investment of Rs.1000/- and in multiple of 100 with no upper limit. The interest will be calculated quarterly and payable annually. The interest earned is completely taxable under the Section 80C of the Income Tax Act, for the investment made in the 5-year Time Deposit. The account can be opened individually, jointly or on behalf of a minor and a minor of 10 years and above age can open and operate the account which is transferable too from one post office to another. Currently, TD is providing an interest rate of 5.5% for 1 year tenure up to 6.7​ % for a tenure period of 5 years. A National Deposit Savings Time Account does not permit premature withdrawal within the first 6 months. The post office term deposit rate would be in compliance to the rate specified for a savings account if the corpus is prematurely withdrawn within 6 months and 12 months.

National Savings Certificate (NSC)

5 Years National Savings Certificate which is currently fetching an interest rate of 6.8 % compounded annually but payable at maturity. The minimum contribution is Rs 100, and the contribution in NSC will then be in multiples of Rs 100, with no upper limit. NSC certificate can only be obtained in a single name, joint account (Maximum 3 adults) or also can be acquired on behalf of a minor. Investment made under NSC qualifies for income tax benefit under section 80C. In addition, the interest accrued per year is allowed to be reinvested and thus eligible for tax benefit under Section 80C. The NSC certificates are transferable too from one person to another but only be accomplished once from the date of registration to the date of maturity in the case of NSC VIII.

KIsan Vikas Patra (KVP)

An individual can make a minimum investment of Rs. 1000/- and in multiples of Rs. 100/- with no upper limit which will achieve an interest of 6.9 % which is compounded annually. One of the best parts of KVP is it doubles the amount invested in 124 months (10 years & 4​​​ months). One can purchase a KVP certificate for himself, joint account (Maximum 3 adults) or on behalf of a minor and also the certificate can be transferred from person to person or one post to another across India. Early encashment of KVP is also allowed anytime after 2 and half years of holding it as per the guidelines of the post office.

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