If you’re wondering where to invest ₹1,00,000 for 5 years, you’re not alone. Whether you’re a conservative investor looking for guaranteed returns or a risk-taker seeking higher profits, the choices can be overwhelming. Among the most popular options are the National Savings Certificate (NSC), Fixed Deposits (FDs), and lump sum mutual fund investments. But which one gives the best return in 5 years?
NSC vs FD vs Lumpsum
| Feature | NSC | Fixed Deposit | Mutual Fund (Lump Sum) |
|---|---|---|---|
| Interest/Returns | 7.7% p.a. (compounded annually) | 6% – 8% p.a. | 10% – 15% p.a. (market-linked) |
| Tenure | 5 years | 5 years (for tax-saving FD) | Flexible, but 5 years assumed |
| Lock-in Period | 5 years | 5 years (for tax-saving FD) | None (may have exit load) |
| Tax Benefits | Section 80C deduction, interest taxable | Section 80C, interest taxable | LTCG tax after 1 year, 10% on gains > ₹1 lakh |
| Liquidity | Locked | Locked | High (depends on scheme) |
If you’re investing ₹1,00,000 for 5 years, the best choice depends on your goals:
- For safety + tax benefit, go with NSC.
- For moderate returns + flexibility, try an FD.
- For higher profits + liquidity, explore lump sum mutual fund investments.
Consider mixing two of these options to get the best of both worlds — safety and growth.
What is NSC and How Much Can You Earn?
The National Savings Certificate (NSC) is a government-backed savings scheme offered by India Post. It’s one of the safest investment avenues and perfect for those who want steady, guaranteed returns.
Key Benefits of NSC:
- Interest Rate: 7.7% per annum (as of Q1 FY2025)
- Compounding: Annually, but paid at maturity
- Maturity: 5 years
- Minimum Investment: ₹1,000
- Maximum: No upper limit
- Tax Benefit: Eligible under Section 80C
Example: If you invest ₹1,00,000 in NSC today, at 7.7% compounded annually, you will receive approximately ₹1,45,650 after 5 years. That’s a return of over ₹45,000, and it’s guaranteed.
Note: Interest is reinvested every year and qualifies for Section 80C deduction (except in the final year).
see also: Deposit ₹50,000 Every Year in Post Office’s PPF Scheme
Fixed Deposit (FD) Returns for 5 Years
A Fixed Deposit (FD) is another low-risk investment option offered by banks. Many banks offer 5-year tax-saving FDs, which also qualify under Section 80C.
Key Features of FDs:
- Interest Rate: 6% to 8% per annum
- Compounding: Usually quarterly
- Lock-in: 5 years for tax-saving FDs
- Tax Benefit: Section 80C
- Minimum Investment: ₹1,000
Example: If your bank offers 7% interest and compounds quarterly, your ₹1,00,000 FD will grow to about ₹1,40,255 in 5 years.
However, FD interest is fully taxable, and TDS (Tax Deducted at Source) may apply if interest exceeds ₹40,000 in a year (₹50,000 for senior citizens).
Lump Sum Mutual Fund Investment for 5 Years
If you’re open to taking some calculated risk, lump sum investments in mutual funds can potentially deliver much higher returns than NSC or FD.
Key Benefits:
- Returns: Historically 10% – 15% per annum (equity funds)
- Tenure: No lock-in (except ELSS)
- Liquidity: High, redeem any time
- Taxation: 10% LTCG on gains over ₹1 lakh
Example: If you invest ₹1,00,000 in a diversified equity fund with a 12% annual return, you could get around ₹1,76,234 after 5 years.
Risk Alert: These returns are not guaranteed and depend on market performance.
Detailed Comparison: Which One is Better?
| Criteria | NSC | FD | Mutual Fund (Lump Sum) |
|---|---|---|---|
| Safety | Very High | High | Moderate to Low |
| Returns | Fixed | Fixed | Market-linked |
| Tax Benefit | Yes (Section 80C) | Yes (Section 80C) | Only ELSS funds |
| Liquidity | Low | Low | High |
| Post-Tax Gains | Moderate | Moderate to Low | High (if managed well) |
Verdict:
- Choose NSC if you want guaranteed returns with tax-saving benefits.
- Choose FD if you want quarterly interest payout or are a senior citizen (for better rates).
- Choose Mutual Funds if you’re comfortable with risk and want higher profits.
Practical Advice Before You Invest
- Assess Your Risk Appetite: Are you okay with market ups and downs? If not, stick to NSC or FD.
- Check Tax Bracket: If you’re in the 30% tax bracket, FD interest may shrink your real returns.
- Need Liquidity? Mutual funds offer easy withdrawal anytime.
- Diversify: Don’t put all your eggs in one basket. Consider splitting ₹50,000 in NSC and ₹50,000 in mutual funds for balance.
see also: Does This Post Office Scheme Really Give Interest of ₹41,478 on ₹1 Lakh?
NSC vs FD vs Lumpsum FAQs
Q1. Can I break NSC before 5 years?
Only under special conditions like the investor’s death or court order. Otherwise, it’s locked.
Q2. Are mutual funds safe for 5 years?
Yes, for longer terms like 5+ years, equity mutual funds tend to outperform other instruments, but they carry market risk.
Q3. Which is better for tax saving – NSC or FD?
NSC often gives better post-tax returns due to reinvested interest being tax-deductible (except final year).
Q4. Do I need a PAN to invest in NSC?
Yes, PAN is required for NSC investments exceeding ₹50,000.
Q5. What are some good mutual fund options for lump sum?
Look at funds like Nippon India Large Cap, Mirae Asset Large Cap, or Parag Parikh Flexi Cap. Check platforms like Groww or ET Money.
