For most investors, fixed deposits and small savings schemes are the favourite debt options. But though fixed deposits and small savings schemes offer assured returns, the interest earned is taxed at normal rates applicable to the investor. In the 30% tax bracket, the 6% interest earned on the fixed deposit is reduced to 4.2% after tax. NSCs are currently offering 6.4%, which will be reduced to around 4.4% post tax in the 30% tax bracket.
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