Post Office FD Vs NSC: While investing, don’t just look at the interest rate, also look at its calculation. If a scheme is also offering compounding interest, it is very important to see whether its calculation is being done on a quarterly basis or on an annual basis. Here is the calculation of two such schemes.
Investment Tips, Post Office FD Vs NSC: When you go to invest in a scheme, you first look at its interest rate. Most people think that higher interest rate means more profit. But this does not happen because the profit or loss in a scheme depends on the calculation of interest. There are many schemes which, despite having a higher interest rate, do not give the profit that is available in a scheme with a lower interest rate. In such a situation, it is important to see whether the interest rate is being calculated on the basis of simple interest or compounding interest. In compounding interest, interest is also given on the interest in addition to the principal.
Apart from this, it is also worth noting that if compounding interest is also being given on any scheme, then its calculation is being done on a quarterly basis or on an annual basis. NSC and Post Office Time Deposit schemes are excellent examples of this. In Post Office Time Deposit, compounding interest is given on the basis of 7.5% interest rate, while in NSC, compounding interest is given on the basis of 7.7% interest rate. But still the profit received in Post Office FD is slightly more than NSC. Understand here how-
This is how the calculation will be done in Post Office TD
Post Office TD i.e. Post Office FD scheme has a tenure of 5 years. In this, interest is given at the rate of 7.5%. In this scheme, interest is given annually, but its calculation is done on a quarterly basis. That means if there is 7.5% interest, then it is divided into 4 parts on a quarterly basis. 7.5/4= 1.875% interest is charged on the amount every three months. In such a situation, the method of calculation will be like this – for example, if you invest Rs 1,00,000 in the scheme, then in the first three months, interest of Rs 1,875 will be charged on it at the rate of 1.875%. In this way, the amount will become Rs 1,01,875. After the next three months, 1.875% interest will be charged on the entire amount including interest of Rs 1,01,875. In this way, interest will be charged on the entire amount including interest at the rate of 1.875% every three months. In this way, interest will be charged at the rate of 1.875% 4 times in a year and 20 times in 5 years. In this way, the maturity amount will be Rs 1,44,995 after calculating for 5 years.
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This is how the calculation will be done in NSC
If you invest in NSC, then you will be given interest at the rate of 7.7%. This scheme also has a tenure of 5 years. The interest rate is higher than Post Office TD. But in this, interest is calculated on an annual basis. In such a situation, if you invest Rs 1,00,000 in NSC, then interest will be charged at the rate of 7.7% on Rs 1,00,000 in one year. In this way, interest of Rs 7,700 will be charged in one year. In the second year, interest will be charged at the rate of 7.7% on Rs 1,07,700. In this way, the entire amount including principal and interest will be charged interest 5 times in 5 years and the maturity amount will be Rs 1,44,903.
Meaning that despite the low interest rate, the amount you will get in Post Office FD will be Rs 92 more than NSC. This difference is undoubtedly minor, but it is worth noting that the profit of Post Office TD is more than NSC. On the other hand, if the interest of 7.7% was received in 5-year TD, then the maturity amount would have been Rs 1,46,425. In such a situation, despite having equal tenure and equal interest rate, the profit of Post Office FD would have been Rs 1,522 more than the profit of NSC.
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