FD and PPF which is better?



In assuring convenience and safety over several other kinds of investments, Fixed Deposit (FD) and PPF (Public Provident Fund) are highly popular investment options. Though both of them are investment instruments, there are some stark differences between them that are worth considering for the purpose of making the right choice. If you are wondering which one is the right kind of investment option for you, the discussion hereunder will give you some useful points to weigh their pros and cons.

FD and PPF differ substantially from each other

Both these modes of investments offer a great degree of convenience to the investors. Nevertheless, the differences between them are substantial. Each of them come with their own unique set of characteristics that are important for customers. Here we compare the different features of FD and PPF.

FD and PPF - Comparison

Tenure

PPF comes with a rigid tenure. This means the investment you make will be locked in for 15 years. There are no other flexible tenures offered to the customers when it comes to PPF. On the other hand, FDs come with flexible tenures ranging from 12 months to 60 months. While the investor can choose the tenure of his investment in case of FD, it is not possible to do so with regard to PPF.

Premature withdrawal

The amount invested in PPF can be withdrawn only after 5 years. Even then the amount you can withdraw is limited. Hence for all practical purposes, you can say you have no control over the amount invested in PPF for the entire tenure of the investment. On the other hand, it is possible for you to withdraw the amount invested in FD during any point of time when you come across a need. You can close a FD prematurely or can avail of a loan against them.

Tax benefits

Section 80C of the taxation laws in India makes it possible to earn tax benefits on both PPF and FDs. In order to avail of the tax benefit for investing in FD, you must invest the amount for a specific period of time.

Loans

The investor can avail of loans against PPF only after the PPF investment completes 3 years. However, you can get a loan against FD during any point of time. You can get loans up to 75% on cumulative FDs and up to 60% on non-cumulative FDs.

Limit on deposits

In PPF, you can invest only up to 1.5 lakhs in a year. There is no upper limit on how much you can invest in a FD in a year.

Rate of interest

In case of PPF, the rate of interest is set by the government. The rate of interest of FDs are set by individual banks NFBC.

Final word

As an investment instrument, FD offers more flexibility than PPF. If you are keen to take advantage of the benefits of FD, do some research to find out which bank is offering the best interest rate on a FD and make your investment decision.
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