Which is better among National Saving Certificates (NSC), Kisan Vikas Certificates (KVC) and Monthly Income Scheme (MIS)? How to benefited more with these schemes?

National Saving Certificates (NSC), Kisan Vikas Certificates (KVC) and Monthly Income Scheme (MIS) are main among many postal schemes. Among them only NSC has tax exemption. Savings of maximum Rs. 1 lakh can be done. Tax on the income earned from interest from all these schemes is the same. Let us compare interest on bank fixed deposits with the interest rates of these schemes. Then we will have clarity on where to save.

KVP is benefited only if it is till the end…

We have to loose more if we redeem the Kisan Vikas Certificates before the maturity. Let us suppose you have saved Rs. 10,000 in KVP. If you redeem the amount before six years, you will end up getting Rs. 5,433 only. This is less when compared to the income from national savings certificates and fixed deposits.

–If you invest in NSC with duration of six years, Rs. 10,000 will fetch you an income of Rs. 6010.

–Banks are offering 7.5% of interest quarterly on the fixed deposits tenured for 5 years and more. As per this calculation, you will get Rs. 5,620 for Rs. 10,000.

Did you notice! In a duration of six years, the other two saving schemes are proving profitable than KVP.

–Principle amount gets doubled in KVP for a period of 8 years and 7 months. Rs.10, 000 will fetch another Rs.10, 000. Compound interest annual growth rate (CAGR) is 8.4%.

–According to the present banking rates, if you save for the same period in fixed deposits, it will fetch you Rs. 8,920.

–For the same period, if you save in NSC you will get Rs.9, 607. These certificates are not extended after six years. This is an attempt to know how much income we get in different saving schemes.

–KVP is a good selection than the NSC and Fixed deposits if you decide not to redeem the money before the maturity period.

Another way:

–Postal MIS Scheme is the best scheme available for the people who want regular monthly income.  If you invest a lump sum amount you can get regular monthly income. Annual rate of interest is 8%. 5% bonus is given on the principle after the maturity date.

–Because the amount of interest is taken every month, you will not get the uses of the compound interest. This is less when compared to the FD and other savings schemes.

–Those who invest in the MIS scheme have an alternative option; they can divert the monthly interest to the postal or bank recurring deposits. Presently, postal 5 years RD is fetching 7.5% of interest quarterly. Banks are giving 6.5 to 7.5% of interest on 5 to 10 years tenured RD. It is better to choose six years tenure.