Fixed Deposit (FD) vs Public Provident Fund (PPF) – Which is Better For You?

For a woman, safety of her funds is very important. She loves the security and safety that comes with saving her money in an investment option that will give her fixed interest. Two such options available to her are: Fixed Deposits and Public Provident Fund. But, what is the difference between PPF and FD? And, which one is most suitable for her? Let’s discuss in this blog.

What is a Fixed Deposit?

Fixed Deposits are fixed-term investment instruments that allow investors to deposit a lump sum amount for a specific period at a fixed rate of interest. There are different types of FDs like bank FD, tax saving FD, corporate FD etc.

Who is eligible to open a FD?

• A FD can be opened by any individual. Parents can open a FD in the name of their minor child.
• As FDs are offered by different banks, companies and NBFCs, the eligibility criteria vary with the offering institution.

What are the features of FD?

• FD offers a fixed rate of interest on investment. Depending on the offering institute, different FDs will have different interest rates being offered.
• Investors can choose their investment tenure according to their financial goals.
• FD are offered by Banks (Bank FD) as well as by Corporates and NBFCs (Corporate FD).
• Certain FDs offer special interest rates for women and senior citizens.

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What is Public Provident Fund?

Public Provident Fund is a scheme where you can save money with the purpose of earning fixed interest on your savings and accumulating a corpus, typically for retirement or any other long-term goal.

Who is eligible to open a PPF?

• A PPF account can only be opened by an Indian resident.
• Minors can open an account with the help of a legal guardian.
• Only one PPF account can be held by an individual.

What are the features of PPF?

• PPF allows saving with a minimum investment of just ₹500 and a maximum investment of ₹1,50,000 in a year.
• The current interest rate offered for PPF is 7.1% p.a. (these returns get revised periodically by the Government).
• PPF offers a loan facility after 3 years of account opening, where you can avail 25% of the amount saved as a loan.
• PPF allows premature withdrawal after 6 years of account opening. Withdrawal amount can be 50% of account balance of the previous year or 50% of the account balance at the end of 4th preceding year whichever is lower.
• PPF offers tax benefits. Contributions to the scheme as well as the amount received on maturity are tax exempted.

Fixed Deposit vs PPF

PARAMETERS	FD	PPF
Issuer	Banks, corporates and NBFCs	Govt. of India
Type of Investment	Tenure can be selected as per their goal	Long-Term
Eligibility	All individuals, companies, partnerships, trusts etc.	Indian residents
Interest Rate	Varies depending on issuing institute	7.1% p.a. currently*
Interest	Fixed, at given interest rate	Fixed, but interest rates are revised by the govt. periodically
Risk Level	Relatively low	Relatively low
Maturity	Maturity period of FD can be chosen by investor	Maturity period of PPF is 15 years from the date of account opening.
Taxation	Interest Income is taxed. Tax benefits on FD are offered for tax saving FDs only.	Interest Income is tax-exempt. Tax benefits on PPF investments made upto Rs. 1.5 Lakh under Section 80C.

FD or PPF: which is better?

Both FD and PPF are popular savings options for women. They are low risk instruments that deliver fixed returns to the investors.  An FD could offer a higher interest rate, and greater flexibility in terms of maturity and withdrawal. Making a decision between FD and PPF depends on an individual’s financial goals as well as interest rate and tenure requirements.

One thing to be noted is that typically, both FD and PPF do not generate inflation-beating returns over the long term. Hence, when you invest in these options it is essential for you to diversify your portfolio. Ensure that you also invest in other asset classes such as equity, gold etc.

Want to diversify your portfolio? Check out Lxme’s expert curated equity, gold and many more goal-based portfolios and start investing!

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