Fixed Deposits (FDs) and Public Provident Funds (PPFs) are both popular investment options in India, particularly for individuals seeking lower-risk investments with guaranteed returns.
However, both PPF and FD have their own benefits and features. Fixed deposits can be both short-term as well as long-term, while PPFs are long-term investments. Therefore, it is important to know the key differences between PPF and FD, which have been explained on this page.
A fixed deposit (FD), often known as a term deposit, is an investment option that allows consumers to safely deposit their funds in an account while simultaneously earning interest on the deposit. An FD interest rate is always higher than that of a savings account interest rate.
In a fixed deposit account, the interest rate and deposit amount are both fixed throughout the tenure. One can apply for an FD from all banks, including commercial banks, small finance banks as well as non-banking financial companies.
The Public Provident Fund (PPF) is a government-backed investment and tax-saving tool. The Ministry of Finance introduced this program more than 50 years ago, and it is still popular among investors who prefer to avoid market-related risks. PPF is completely safe because it is backed by the government.
Although this is the government of India's main offering, some of the country's largest banks also offer it as a product. When compared to India Post's PPF rates, these banks' interest rates for PPF may differ and yield higher interest.
The table below mentions the difference between PPF and FD:
|
FD |
PPF |
|
|
Tenure |
You can choose between short-term and long-term fixed deposits depending on your investment objectives. The term might last anywhere from seven days to ten years. |
The minimum term of a PPF is 15 years. If you like, you can extend it in 5-year increments. |
|
Returns |
It is dependent on the investor's preference (regular credit to the associated bank account or on maturity). |
Every financial year's payment is due on March 31st. |
|
Liquidity |
Moderately liquid; certain forms of FD allow for early withdrawals. |
Premature withdrawals are permitted every year beginning in the seventh financial year due to a lack of liquidity. |
|
Tax Benefits |
Under section 80 C, you are entitled to a tax exemption of up to Rs. 1.5 lakh. |
Income is tax-exempt to the fullest extent possible. |
|
Eligibility Criteria |
NRIs, residents, HUFs, Trusts, Corporation Firms, and others. |
Only Indian citizens are eligible. |
In the case of a PPF, the interest earned on deposits is compounded once a year. This is a set amount for all deposits made in this savings account. There are two methods for calculating interest on fixed deposits: compound interest and simple interest.
You can use tools like the FD Calculator and the PPF Calculator to estimate the maturity amount. The tools are free to use and can be used several times to help investors choose the best option for them based on various FD/PPF rates and tenures. Basic information such as FD interest rates or PPF rates, as well as deposit amount and term, must be entered into the form, after which the calculator will provide the best estimate based on the inputs.
It is crucial to note that the amount determined by these calculators is merely a guideline and not an exact figure.
Fixed deposits are a risk-free investment option for anyone looking for a safe investment. Fixed deposit investments have predetermined returns. As a result, market volatility has no impact on fixed deposit returns.
Investors can choose from a variety of market-linked instruments that provide higher returns. They are, nevertheless, linked to a significant level of risk. Investors must also seek out safe investment opportunities in order to achieve balanced financial growth. As a result, if fixed deposits are made with reputable financial institutions, they are safe and provide guaranteed returns.
PPF investments may be beneficial for investors seeking fixed returns over a long period of time. In addition, PPF has a 15-year lock-in term. As a result, if an investor is satisfied with locking in a portion of their money for 15 years, PPF is a good option. A person's PPF account can also be extended for a period of 5 years at any time during their life.
PPF investments can also be linked to financial goals such as children's education or marriage, property ownership, and more. As a result, anyone can include this instrument in their fixed income portfolio as a long-term investment. Investors who look forward to saving money on taxes can invest in PPF and get a tax deduction under Section 80C.
The following are the key benefits of the FD scheme:
The following are the key benefits of the PPF plan: