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are fds still better than ppfs?

are fds still better than ppfs?

investing in schemes such as fds and ppfs is a safe way of saving smart, saving tax, and increasing your earnings
February 17, 2021
6 min read
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are fds still better than ppfs

Are FDs Still Better Than PPFs

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it's hard enough to earn a decent sum of money; managing one's savings and finances, it turns out, is a whole new issue. someone eager to invest their hard-earned money might be spoiled for choice: there are simply too many options in the market right now.

if, in contrast, you know you're looking for a risk-free, stable option, it's most likely you're going to go the fd or ppf way. both schemes have lasted the test of time, having been around for over 50 years.

so which of the two should you opt for? check out a ppf calculator right away to estimate what your savings can amount to, or read on for a comparison between the two options.

a brief comparison of fd and ppf

basic introduction

fd (fixed deposit) or term deposit is a scheme in which an investor secures his/her money with the bank to yield a higher interest rate, for a fixed tenure. this tenure can be as short as three months - even shorter, in some cases.

the public provident fund (ppf) is a plan launched in 1968 with a minimum term of 15 years. it requires the investor to make annual payments.


maturity period

for an fd, the investor gets high flexibility, starting from 7 days to 10 years. this time period is decided early on and is directly related to the bank's interest rates.

a ppf has a long tenure, with a minimum of 15 years. if you are looking for a long-term, risk-free market investment, ppf might be the right choice for you. if you'd like an estimate of your returns, try out the ppf maturity calculator.


tax benefits

for fds, tax benefits come into the picture if the maturity period is over five years. you can use the invested amount to claim tax benefits of up to rs. 1.5 lakhs, under section 80c of the income tax act.

ppf has a more attractive image here by falling under the eee (exempt exempt exempt) status of section 80c of the income tax act. it also offers tax benefits of up to rs. 1.5 lakhs, with no wealth tax applicable. you can chart out your benefits with this ppf return calculator and get a better estimate.


partial withdrawal policy

in the case of fd, this aspect is flexible as well. you are free to withdraw all of your investment in an fd if necessary.

however, for ppfs, the investment is locked in for five years. the withdrawals are strict, and even if permitted under certain scenarios, come with limits.


other restrictions

an investor like you can have multiple fd accounts associated with different banks, while a ppf account limit is subject to government regulations.

fds have no restrictions on amounts invested. for ppfs, the annual limit is ₹ 1.5 lakhs.

if you're leaning towards a ppf, look into a ppf calculator to see what your savings can look like over the years.