Difference Between FD and PPF

Posted on Thursday, October 24th, 2024 | By IndusInd Bank

When it comes to secure and reliable investment options in India, Fixed Deposits (FDs) and the Public Provident Fund (PPF) are often at the top of the list. Both these instruments offer safety, assured returns, and tax benefits. 

However, there are significant differences between both, and each instrument caters to distinct investor types and financial goals. Which is ideal for you? Let’s explore the difference between PPF and FDs in detail to get to the answer. 

What is a Fixed Deposit?

• A Fixed Deposit (FD) is a financial instrument you can book via banks and financial institutions. It allows individuals to deposit a lump sum amount for a fixed tenure at a predetermined interest rate.

• FDs are regarded one of the most secure investment options. They offer guaranteed returns that are unaffected by market fluctuations.

• FDs have flexible tenure options; they can range from 7 days to 10 years. While FDs allow premature withdrawal, it often comes with a penalty.

• Investment in tax-saving FDs allows you to claim tax benefits under Section 80C of the Income Tax Act.

To better understand Fixed Deposit VS PPF, let’s look at PPF in some detail as well.

Also Read: Fixed Deposit Myths Debunked- What You Need to Know

What is the Public Provident Fund?

• The Public Provident Fund (PPF) is a government-backed long-term savings scheme. It aims to encourage small savings and offers attractive returns combined with income tax benefits.

• PPF has a tenure of 15 years. One can extend it in blocks of 5 years if needed.

• The money you invest in a PPF is eligible for tax deductions under Section 80C. In addition, the interest earned and maturity amount are tax-free.

• The government decides and reviews the interest rate for PPF on quarterly basis.

• Even though PPF has a lock-in period of 15 years, partial withdrawals are allowed from the seventh year onwards.

Difference Between FDs and PPF

The following table describes the difference between PPF and FDs in details:

Still wondering which is better – PPF or FDs? Let us help you.

Benefits of FD and PPF 

When it comes to low-risk investment avenues in India, Fixed Deposits (FDs) and Public Provident Fund (PPF) often top the list. While both offer safety and steady returns, they cater to slightly different financial goals. Let’s take a look at what each one brings to the table. 

Benefits of FDs: 

FDs are a go-to choice for many because of their reliability and flexibility. Here’s what makes them appealing:  

• You can choose from a wide range of tenures, from just a few days to several years, depending on your needs. 

• The returns are fixed—so there’s no second-guessing how much you’ll earn. 

• If you’re looking for periodic income, many banks offer the option to receive interest payouts at regular intervals. 

• Some tax-saving FDs come with deductions under Section 80C of the Income Tax Act. 

• Senior citizens usually get a higher interest rate, which makes FDs even more attractive for retirement planning. 

Benefits of PPF: 

PPF is more of a long-term commitment, but it’s worth it for those aiming to build a secure financial cushion over time. Here are its standout features: 

• You can start investing with just Rs.500 in a financial year and contribute up to ₹1.1.5 lakh annually. 

• It’s a 15-year scheme, which encourages disciplined, long-term savings. 

• Contributions, interest earned, and maturity proceeds are all tax-exempt under the EEE (Exempt-Exempt-Exempt) regime. 

• Backed by the Government of India, PPF is one of the safest investment options out there. 

• You can make deposits via multiple channels—online transfers, cheques, demand drafts or even cash. 

• Nomination facilities are available, which adds a layer of security for your loved ones. 

Wrapping Up!

Both FDs and PPF are excellent investment options, each with its unique benefits. Understanding the above points can help you decide which is better for you – FD or PPF, and you can make an informed choice accordingly.

If you prefer Fixed Deposits, then consider investing in one with IndusInd Bank. We offer high Fixed Deposit rates – so your money grows safely and steadily! Opening an FD with us is easy, hassle-free and 100% digital. Non-IndusInd Bank customers can book an FD with us as well!

Don’t wait, Book a Fixed Deposit with IndusInd Bank now!

Disclaimer:
The information provided in this article is generic and for informational purposes only. It is not a substitute for specific advice in your circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for making any financial decisions based on the contents and information.