The investment options are of two types – one that provides fixed returns and one that depends on the market for its returns. A fixed deposit investment offers fixed returns without any risk. It doesn’t rely on the market for its returns, unlike other market-linked investment options.
The main goal for a fixed deposit is for savings with security, whereas with a PPF it’s about growth. Both the fixed deposit and PPF investments fall under the fixed returns category. But mutually they are very different from each other in many ways. This article will help you understand it better before making your investment choice.
What Are PPF and FD?
Fixed deposit or FD is one of the popular investment options in our country. The guaranteed returns and higher FD interest rates are the reason for the fixed deposit is popular among investors. The specified deposit interest rates are more sophisticated than that of a standard savings bank account.
Generally, be ranging around 8 to 10%, that will change depending on the financial provider you get your fixed deposit. The fixed deposit returns will not vary as it doesn’t rely on the market for its returns, so you don’t have to worry about the financial crisis.
Public Provident Fund (PPF):
PPF is also a safe and secured investment option that will help you grow your savings. The money that you invest in your PPF account will have a lock-in period of 15 years, and the investor will compound the interest rate. You can also extend this plan for another five years. With the help of a PPF account, you can quickly build savings for your children’s education or their future endeavours.
The current interest rate offered for a PPF account is 7.1%, and it is straightforward to open. Both the post office and banks provide options to make your PPF investment. You should invest at least Rs.500 each year to keep the account in the process, and you may invest up to Rs.1,50,000 as maximum. When you are investing for your children when they are minor, you should open it in your name or your spouse name.
Features Of A PPF Vs FD:
PPF is a government based investment option that will help in satisfying your long term goals. To maintain the account open, you should make sure to invest some amount each year. You can use the funds for planning your retirement or for your children’s higher education. It has a higher lock-in period of 15 years compared to other investment options.
Fixed deposits are an investment where you should invest a lump sum for a fixed term. The lump-sum will grow with a fixed interest rate throughout the tenure to provide you with fixed returns. There are specific terms that will have lock-in periods like PPF, other than that you can liquidate the amount when you are in need. Both banks and NBFCs offer a fixed deposit for their customers at a higher interest rate.
Tenure Of PPF Vs FD:
The tenure for PPF is 15 years, and you can extend it to another five years, depending on your needs and requirements. You cannot afford to get flexibility in choosing tenure with a PPF account, and it will help in accumulating the amount for your future needs. But it will provide guaranteed returns, and it is the safest investment option.
Whereas, the fixed deposit investment comes with variable tenure options and is very flexible. When you choose to invest in the fixed deposit, you can select the tenure depending on your financial goals. The fixed deposit investment ranges from days to years and is one of the reliable investment options.
Interest Rate For PPF Vs FD:
When you plan on investing, you should compare the returns that you get with both investment options and the one that provides better profit will be the best option for you. The fixed deposit interest rates range from 8 -10%, depending upon the financial provider and the tenure you choose to invest. At the same time, the government offers an interest rate of 7.9% annually for PPF accounts.
Partial Withdrawal Of PPF Vs FD:
The most important goal that a long term investment provides is wealth accumulation and growth in your savings. So the withdrawal policy for these accounts are stringent, and they have a lock-in period for specific tenure and investment options.
For a PPF account, it generally 15 years before when you cannot withdraw or cancel your PPF account. Whereas for a fixed deposit other than the five-year tax-benefit fixed deposit you can withdraw the other deposits with a certain amount of penalty. So a fixed deposit will have more flexibility and control over the money you have invested.
Tax Benefits For A PPF Vs FD:
The tax benefit is another thing that you should see before making an investment choice. You can get tax exemption up to Rs.1,50,000 when you invest a tax saving FD of 5 years and the PPF account. The interest rate that you gain for your investment exceeds Rs.40,000 per year, and then you will fall under tax depending upon the tax slab you fall.
Investment Amount Of PPF Vs FD:
The amount that you invest for a fixed deposit and PPF account is upon your choice. The minimum investment amount for your PPF account is Rs.500 up to Rs.1.5 lakhs per year. With the fixed deposit, the minimum and maximum amount will depend upon the financial provider you choose and the amount you want to invest.
Loan Facility For PPF Vs FD:
You can avail a loan against your fixed deposit investment where your fixed deposit will act as a collateral for the loan. You can avail up to 75% of your invested amount as a loan during the tenure of your deposit. But when you have a non-cumulative FD, then the amount you can get as a loan will be lower. Whereas, with PPF, you cannot get a loan against it until the lock-in period crosses three years.
Whatever might be your financial requirements, you can plan and choose an investment type that best suits you. Each person might need different things like wealth growth, protection and security. You should understand your needs and choose the investment option that satisfies your requirements to benefit from it. When you compare everything together, you can see that an FD is more flexible to liquidate than a PPF. But when you are sure you will not need the money for years from now, then a PPF is suitable too. So everything you do with investment depends on your choices and financial standings.