/Fixed deposit vs PPF

Fixed deposit vs PPF

An investor always wants to invest his hardened money in those financial instruments which are not only giving him better returns but also are risk-averse. so fixed deposit and PPF almost fulfil this criterion, as they give a better return than a saving account and are safe.so each option have their characteristics and they are maintaining it according to their nature of the investment. we will discuss the various feature of fixed deposit and PPF in detail and try to understand them.

A bank fixed deposit which is also known as term deposit give a various option to book fixed deposit among them are,

Regular fixed deposit

Tax-saving fixed deposit

Senior citizen fixed deposit

Flexi fixed deposit

So you can avail the fixed deposit according to your requirements.

in fixed deposit further, you have two more option i.e cumulative or non-cumulative, so you can decide the interest rate at maturity like it should be monthly, quarterly, or yearly.

The Public Provident Fund is a financial instrument, which is framed under central government introduced as PPF act of 1968. it is used as a small saving instrument used by employed individuals and workers in unorganized sector.

lets discuss the various parameters of fixed deposit and PPF one by one.

Investment period

The investment period for FD is from 7 days to 10 years with different maturity as per the investor requirement, whereas the investment period for PPF is 15 years mature only after this investment period, and your investment is blocked for first five years.

Interest rate

The interest rate on FD varies from 5 tom9%, or even more in some financial institute, and this interest rate may vary as per the invested amount and period of investment, and also give an option of cumulative and non-cumulative, but in case of PPF the interest rate is nearly fixed to 8.0% compounded annually, and do not depend upon invested amount and period since both them are fixed. so in case of FD, you can negotiate interest rate according to the investment period and invested amount.

Premature withdrawals

So with different maturity period, FD provides you more flexibility to your investment in case of emergency or any difficult situation as you can break your FD even before maturity date accept tax-saving FD, with small amount of penality, But in case of PPF you cannot withdraw before five years, that is to a limited extent, hence the minimum lock-in period for PPF is 5 years.

Tax benefits

The amount earned from the fixed deposit is fully taxable. It can be added to your total income and taxed as your slab income. you can see it while seeing your income head, it will show in income earned from other sources. TDS will be deducted at the time of amount credited to your account, so it will be deducted every year, even if the maturity period of your fixed deposit is 5 years.
in case of tax saving FD, you can save tax, as that is only which is entitled to deduction under section 80c of the income tax act. for the rest, this facility is not available.

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In case of PPF, you have Exempt-Exempt-Exempt status, so you have benefits of deduction under section 80 c of income tax act 1961, and the interest earned is also not taxable, even on maturity. so PPF is a good tax-saving financial instrument PPF

Minimum and the maximum amount to be invested

In case of PPF, the maximum amount to be invested is limited to 150000 rs, annually. whereas in FD theirs is no such restriction as you can do investment in crores. Please check bank policy before investing in a large amount.

Loan facility

This facility is available against your fixed deposit, the amount for loan could be 80 to 90 % of FD amount. The interest rate charged is 2 % higher than your fixed deposit rate.so in case of emergency you can avail this facility, but loan against PPF is available third-year onwards, and that is up to 25% of your balance amount. The loan must be paid in 36 EMI, in 3 years. so if you want to take the second loan than it can be taken before the end of your 6th financial year. But there is a precondition to that, the first loan must be settled before taking the second loan.

A Fixed deposit and PPF can be opened by.

Resident Individuals, Hindu Undivided Families (HUFs, Proprietorship Firms, Partnership Firms, Limited companies, Trust

NRI is also allowed

In the case of PPF, a person needs to be resident Indian, as NRI and HUF not allowed to open.

you can avail nomination facility in fixed deposit as well as PPF.

how you can avail a PPF facility by filling the various form


Fixed deposit and PPF are good investment avenue for those who want to earn better interest rate than their saving account, and keep principal amount intact. so while investing in these financial intrument we have to keep in mind, liquidity, interest rate, maturity period, and inflation rate. The interest rate is different for fixed deposit and PPF, but in case of FD, you can avail the best interest rate by comparing the interest rate of the various financial institutions, where FD is available. in terms of liquidity, the investment in FD is more liquid then PPF. one can avail loan facility fixed deposit without waiting for three years period which is the case in PPF. PPF has an advantage over FD in case of tax benefits as PPF comes in the category of E-E-E, i.e exempt exempt exempt. Both of them are not adjusted to the inflation rate, so if we want our an investment to be in par with inflation then we have to look for other avenues, so we can do investment in a mutual fund, which will take care of inflation to quite an extent.

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Engineering graduate, and now pursuing career in personal finance management