FDs are safe investment options offered by banks and NBFCs that provide consistent and
assured returns.

Non-Convertible Debentures (NCDs) are basically unsecured bonds providing high returns, which cannot be converted to comp-any equity or stocks.


Given below is a comparison between the two that will help you decide which one to go for:


Liquidity

FDs have lower liquidity since they have a lock-in period and withdrawal of funds before maturity involves penalty. NCDs on the other hand can be sold in a stock exchange, anytime.


Security

FDs are much more secure than NCDs. They provide assured returns as per a fixed interest rate unlike NCDs which involve financial risk. Moreover, FDs offer an insurance of 1 lakh rupees to secure the amount invested. The same is not available with an NCD.


Tax Exemptions

FDs are taxed under TDS whereas NCDs are not. When the interest earned through an FD in a particular financial year exceeds Rs10,000, Tax Deduction at Source (TDS) is done at the rate of 10%. However, you can save up on taxes by opting for a tax-saving fixed deposit under Section 80C of the Income Tax Act, 1961.


Considering all the above points, it is quite clear that Fixed Deposits (especially those of NBFCs) are a better option than Non-Convertible Debentures.