Returns: 7-8%

Maximum deduction: Rs 1 lach

Income : Fully taxable

The National Savings Certificates are currently on a par with the PPF in terms of pre-tax returns. But they lose out to the PPF and EPF because the returns are taxable, thus reducing the post-tax yield. Needless to say, they are equally safe and have the advantage of a shorter lock-in period of six years.

The tax treatment of NSC income makes all the difference for taxpayers who have an income that falls within the 30% tax slab. However, if you are a retiree or an annual income lower than Rs 3 lakh, the tax is marginal (only 100% , plus 30% cess). Five-year deposits also have a short lock-in period and offer almost the same returns. The difference is that the interest rates of FDs are more variable and the deposits private banks are not as safe.