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Difference Between Fixed Deposit (FD) vs Public Provident Fund (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:
| Parameter | Fixed Deposits | PPF |
| Tenure | Flexible tenure ranging from 7 days to 10 years. | Fixed tenure of 15 years, extendable in blocks of 5 years. |
| Interest Rate | Fixed interest rate throughout the tenure; varies across banks and as per tenure. | Interest rates can change as per the government’s directives. |
| Tax Benefits | Tax-saving FDs offer deductions under Section 80C, but the interest earned is taxable. | Investment amounts is tax-deductible under Section 80C, while interest earned and maturity proceeds are tax-exempt under Section 10. |
| Liquidity | Higher liquidity with options for premature withdrawal, albeit with a penalty. | Lower liquidity due to 15-year lock-in period; however, partial withdrawals allowed from the seventh year. |
| Risk and Return | Low risk with guaranteed returns. | Low risk and higher returns. |
Still wondering which is better – PPF or FDs? Let us help you.
Which Should You Go For – FD or PPF?
Choosing between FD and PPF depends on your financial goals, investment horizon, and risk tolerance.
Choose FDs if:
- You need a flexible investment tenure.
- You require higher liquidity and may need to withdraw funds before maturity.
- You are looking for assured returns without any interest rate fluctuations.
- You prefer short to medium-term investment options.
Choose PPF if:
- You are looking for a long-term investment with tax-free returns.
- You want to benefit from government-backed security.
- You can lock in your funds for a long tenure of 15 years.
Conclusion
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.
