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  • NSC vs ELSS

    knowing the terms NSC and ELSS

    Earning money is often not enough to lead a stable life, with savings playing a crucial role in determining our future. While there are a number of ways to earn money, there are just a few smart methods to save it, which is why it becomes critical to choose the right saving plan. National Savings Certificates and Equity Linked Savings Schemes are two such popular saving options in the country today, each offering unique advantages.

    NSC – National Savings Certificates are bonds issued by the government to inculcate the habit of saving among Indians. One can purchase these certificates from the post office, with the maturity period fixed at 5 and 10 years.

    ELSS – An Equity Linked Savings Scheme is closely related to prevailing market conditions and is a diversified mutual fund which invests most of the corpus into equities. A lock in period of 3 years and different portfolio options can help one make money faster.

    Differences between NSC and ELSS

    The table below elaborates the differences between National Saving Certificates and Equity Linked Savings Scheme.




    Minimum investment

    Rs 100

    Rs 500

    Maximum investment which can be claimed as tax deduction

    Rs 1 lakh

    Rs 1 lakh


    5 and 10 years

    3 years

    Risk factor

    Low risk

    High risk, depending on markets

    Interest rate

    8.5% per annum for 5 year term and 8.8% per annum for 10 year term

    No fixed interest rate

    Frequency of interest accumulation

    Interest is compounded half yearly

    NA – depends on market conditions

    Fixed return guarantee?


    No, returns are not fixed

    Income Tax deduction applicable?

    Yes, under Section 80C of IT Act

    Yes, under Section 80C of IT Act

    Tax liability

    Interest earned is taxable

    Amount received at end of maturity is not taxable

    Which one to choose – NSC or ELSS

    Both NSCs and ELSS offer unique features, and one needs to factor in the individual requirement before opting for a particular scheme. While the ELSS offers better returns, it is also subject to market risks and in the event of an unforeseen market crash, the investment could fall flat on its back, offering no returns. On the other hand, NSCs offer fixed returns, regardless of external factors, ensuring that you are assured a guaranteed amount at the end of your term. People who do not mind taking risks could opt for ELSS, while someone who just wants a secure future without the hunger for money could choose NSCs. Some ELSS plans have been known to offer returns at the rate of 25 to 30%, which when compared to the 8.8% returns of NSCs can seem very enticing.

    Similarly, the investment period can be critical while deciding which scheme to choose, with ELSS investments having a 3 year lock in period, compared to 6 years for NSCs. This allows one to choose a scheme based on the requirements, either short term or long term goals.

    Systematic Investment Plans offer flexibility to investors when it comes to ELSS, as they can invest amounts as per their current financial condition. Similarly, NSCs have a low minimum investment criteria, which means that people with limited means can opt for them.

    The ultimate decision of choosing a savings scheme comes down to individual preference, and one should take time to figure out what exactly they wish to gain from their investment.

    Important NSC Related Reads

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