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NSC vs PPF vs FD: Which Is Better After Tax?
After tax, PPF usually beats NSC and a tax-saver FD for anyone above the lowest tax slabs, but it locks your money for 15 years against five for the other two. At the rates notified for October to December 2026 (PPF 7.1% tax-free, NSC 7.7% taxable), NSC's higher headline rate stops winning once your slab reaches 10%.
The three, side by side
- NSC: a 5-year post-office certificate. Interest compounds yearly at the rate notified when you buy, and is paid at maturity. It is taxable every year as it accrues.
- PPF: a 15-year government scheme with a yearly deposit limit. The interest and the maturity amount are tax-free, and limited partial withdrawals are allowed after the early years.
- Tax-saver bank FD: a 5-year FD with no premature withdrawal. The rate varies by bank, and the interest is taxable every year, usually with TDS.
Under the old tax regime, deposits in all three qualify for the Section 80C deduction up to ₹1.5 lakh a year. Under the new regime that deduction is not available, so only the post-tax return and the lock-in matter.
Why the headline rate misleads
₹1,00,000 in NSC at 7.7% grows to ₹1,44,903 in five years. That looks better than PPF's 7.1%, until you notice that NSC interest is taxed and PPF's is not. A rough post-tax yield is the rate multiplied by (1 minus your slab, including 4% cess):
- 5% slab: NSC about 7.3%, ahead of PPF's 7.1%
- 10% slab: about 6.9%, behind PPF
- 20% slab: about 6.1%
- 30% slab: about 5.3%
For the same reason, a tax-saver FD with a similar rate falls behind PPF once the slab is above the lowest bracket.
How to choose
- Money you need in about five years: NSC or a tax-saver FD. PPF's 15-year lock-in is too long.
- A goal 15 years or more away, such as retirement: PPF, especially if you are in a higher slab.
- You are in a very low slab or pay no tax: NSC's higher rate can win, since there is little tax to lose.
- You are on the new tax regime: compare post-tax yield and lock-in only, since 80C does not apply.
Rates are reset every quarter and apply to new deposits only, so check the current notification before you invest. Our guide on PPF vs Sukanya Samriddhi covers another comparison between small savings, and old vs new tax regime explains how your regime affects the deduction.