Which investment is best for tax exemption?-Fixed deposit or N.S.C. What is the difference between them?

Go for mutual fund ELSS plans. Your funds will be blocked for only 3 years, fully exempt from tax upto Rs.1,00,000 u/s 80c along with other savings, dividend and returns are also exempt.

good luck
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For tax exemption best schemes are -
1 National Savings Certificate (VIII issue)
2 Insurance premium
3 Mediclaim premium.
4 If u can take Home Loan, you will get tax benefit for Interest on loan
5 Deposit of Public Provident Fund. (Rs. 70,000/= for single account)

Difference between NSC & Bank FD (u/s 80C) is -

NSC term for 8 year.
Bank FD's u/s 80C are for 5 yrs.

NSC rate of interest fixed by the Govt. and Bank's FD interest fixed by the Bank itself.

FD can be kept in a bank. Term is 5 yrs. Interest rate is about 9%.
NSCs are purchased from Post Off. Term is 6 yrs. Interest rate is 8%. Interest earned every year is eligible for tax exemption.
Dealing with a bank is much easier than the P.O.
Best investment for tax exemption is ELSS of MFs.

Hi, In my opinion you should invest in Equity linked saving schemes of mutual funds. Though fixed deposits and N.S.C give you guaranteed returns, mutual funds, with slight risk will give you much higher returns as compared to N.S.C or F.D The lockin period is 3 years only. visit http://www.investorcamp.blogspot.com