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  • Fixed Deposit BYTES FROM OUR KITCHEN

    FD Vs PF, EPF, VPF

    Money, it is that one thing around which our lives and the world revolve. Everything we do in our lives is either directly or indirectly connected to the act of earning, saving or spending money, with money ruling the roost in our day to day activities. Money is the harbinger of news, sometimes good and sometimes bad, turning normal people into Gods, wielding power like no other weapon. The fact is that there is no modern world without money, unless we are all willing to give it all up and lead the life of a hermit.

    So we work hard to earn money, putting in blood, sweat and tears to life a decent life, but the thing about money is that it somehow evades us when we need it most. A good savings plan can offer some comfort, helping us believe that there is a back-up in case of financial emergencies, but finding the right back-up can be a difficult task. Money is hard to earn and easy to spend, so a good savings plan could mean the difference between a peaceful retirement and a tension filled life.

    Fixed Deposits and Provident Funds are two popular investment and saving tools in India, both offering multiple benefits to people. Provident Funds are government supported retirement planning schemes, wherein individuals have the opportunity to invest in different kinds of provident funds. The Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) are two popular Provident Fund investment modes in India.

    So which investment opportunity is better? FD, EPF or VPF? The following points could possibly help YOUR money hold its value during financial needs.

    Know the terms

    Fixed Deposits are accounts offered by banks wherein individuals can deposit money into the account for a particular time period. These deposits are generally payable only when the term is completed.

    Employee Provident Fund is a provident fund for employees of companies, which is designed to provide financial stability post retirement.

    Voluntary Provident Fund is a provident fund wherein individuals can choose to voluntarily contribute some percentage of their salary towards it.

    Eligibility

    Fixed Deposits – FDs can be opened by all residents, including minors, if they meet the eligibility criteria of the bank they wish to apply in. A few companies offer Company Fixed Deposit, which are open to individuals and are governed by the rules of the company.

    EPF – Individuals who are employees of organisations are eligible to open an Employee Provident Fund account.

    VPF – Only salaried individuals can open a Voluntary Provident Fund account.

    Investment / Lock in period

    The lock in period refers to the time duration involved for a particular investment to reach its maturity value.

    FD – The Investment / Lock in period for FDs depends on the needs and requirements of the individual account holder. The investment term could range from 7 days to 10 years, offering flexibility and ease of handling to the investor.

    EPF – The EPF is active till the individual concerned is an employee of the organisation. The invested amount can be paid either at retirement or on resignation.

    VPF – This account is active till the individual is an employee of the organisation. The invested amount can be paid either at retirement or on resignation.

    Thus FDs offer ease and flexibility in terms of investment period compared to EPFs and VPFs.

    Interest Rates

    The interest rate offered on investments is often the biggest deciding factor when choosing which option to pick. Bank fixed deposits offer interest rates ranging between 8.5 to 9% per annum, with company fixed deposits offering much higher rates, often ranging between 12-13% per annum. The interest rates are fixed by the individual bank or company concerned and often reflect the competitive nature of business.

    The interest rates for PFs, including EPF and VPF are fixed by the government and currently stand at 8.75% per annum. These rates can be revised only by the government at its sole discretion.

    Tax Benefits

    It so happens that we often feel reluctant to part with our hard earned money, but paying tax is the duty of every individual who falls in the tax bracket. While one cannot avoid tax completely, FDs and PFs offer us the chance to reduce our tax burden to an extent. Individuals can claim deduction under section 80C of the Income Tax Act in case of Tax Saving Fixed Deposits, with the maximum deduction being Rs. 1.5 lakh.

    Investments towards EPF and VPF are also eligible for deduction under Section 80C. Withdrawals from EPF are, however, taxed if the individual has been employed with the same employer for less than 5 years.

    Investment amount/contribution

    Planning for the future is an extremely crucial aspect of investing and miscalculating the investment amount could leave us hanging in the future. FDs have no limit on the investment amount, with the investments depending on the capability of the individual concerned. Some banks are open to investments running into crores, with the investment amounts being subject to the policies followed by the banks.

    In case of EPF, both the employer and employee are expected to contribute 12% of the basic and DA every month. The contribution can be increased as per the needs of the employee. In VPFs the employee can choose the amount he/she wishes to invest, as a percentage of their DA and Basic Salary, with no contribution from the employer. Contributions to VPF are voluntary and are up to the individual concerned.

    Premature withdrawals

    Most banks allow premature withdrawals of Fixed Deposits, subject to the policies of the bank and can charge a certain fine on such premature withdrawals.

    Premature withdrawals are permitted for EPF and VPF, though premature withdrawal of EPF with service less than five years would attract tax deductions, ranging from 20% to 34%, depending on certain conditions.

    Loans

    Financial emergencies can arise at any moment and loans can often quell them temporarily. Most banks offer an overdraft facility against FDs, with the loan amount being as high as 90% of the amount in the FD. The interest rate on these loans is generally 1-2% higher than the current interest rate being paid on the FD.

    Individuals can avail loans against their EPF/PPF amount, subject to them meeting certain criteria. Loans against these are available only for 9 reasons, education, marriage, medical treatment, home purchase, home modifications, lockouts, home-loan payments, calamities and if the individual needs money one year before his/her retirement.

    The table below mentions the differences between FDs, EPFs and VPFs.

    Criteria FD EPF VPF
    Eligibility Open to all Only Salaried Individuals Only Salaried Individuals
    Investment Period 7 days to 10 years Till retirement or resignation Till retirement or resignation
    Interest Rates (Per annum) 8.5-9% for bank FDs and 12-13% for company FDs 8.75% 8.75%
    Tax Benefits Available under Section 80C Available under Section 80C Available under Section 80C
    Investment Amount Flexible 12% Basic + DA by both employee and employer Voluntary
    Premature Withdrawals Available Available Available
    Loans Available Available for certain needs Available for certain needs

    FD or PFs? Where to invest?

    Investments should be done keeping in mind future requirements and current income, and both FDs and PFs (EPF and VPF) offer excellent features to investors. FDs can be an additional investment for individuals above their investments in EPF or VPF. For non-salaried individuals, an FD is the best form of investment as they are not eligible to invest in EPF and VPF.

    FDs offer more convenience and flexibility in terms of the investment amount and individuals can customise it to suit their financial needs, with the higher interest rate helping their money grow faster when compared to EPF or VPF. The investment term options make FDs more attractive, as the term can be chosen based on current needs, allowing people the opportunity to financially plan for even short term needs, which is hard to do in case of EPF and VPF.

    Conclusion

    A lifetime of hard work could dematerialize in one reckless moment and life isn’t always kind to provide second chances. Investing in the right plan ensures safety of not just your money but also your family and way of life. FDs, EPFs and VPFs are unique in their own way, and not investing in them could come back to haunt us. They help our money grow with us, so that we can have something to fall back to in our old age or times of distress.

    FD Vs PF, EPF, VPF Reviews

    • ICICI Bank Fixed Deposit
      "Smart Investment"
      0.5 5.0/5 "Blown Away!"
      In ICICI fixed deposit interest rate is around 6.75% per annum, I opened the FD through online. I have invested Rs. 1 lakh they wont take any charges for the pre matured fixed interest. I believe the interest rate is good compared to the government bank.
      Was this review helpful? 2
      , yamuna nagar
      Reviewed on Jan 10, 2019
    • Kotak Fixed Deposit
      "Average service"
      0.5 3.0/5 "Satisfactory"
      I am having a Fixed Deposit account with Kotak Mahindra bank, they provide good services when compared to other banks. I get good interest rate in returns after the maturity period which is after 3 years. Customer support is average with Kotak Mahindra bank.
      Was this review helpful? 1
      , chennai
      Reviewed on Jan 10, 2019
    • HDFC Bank Fixed Deposit
      "Hassle free"
      0.5 5.0/5 "Blown Away!"
      I also have a fixed deposit account with HDFC Bank. The process to open this account is easy. I can do it online. They also offer a good rate of interest on the account. The bank has always been up to the mark to ban with. It is very convenient and easy.
      Was this review helpful? 1
      , noida
      Reviewed on Jan 09, 2019
    • IOB Fixed Deposit
      "Better Banking Experience"
      0.5 4.0/5 "Great!"
      I have invested a fixed deposit with Indian Overseas Bank. My wife has recommended me about this bank since she is working over there. I invested the money of Rs. 50000. I don't remember about the tenure period. Before 1 years, i have invested the money with them.
      Was this review helpful? 0
      , tiruchirapalli
      Reviewed on Jan 09, 2019
    • ICICI Bank Fixed Deposit
      "Good Deposit"
      0.5 5.0/5 "Blown Away!"
      I have invested a fixed deposit with ICICI. There is no reason for selected this bank. They have offered me a interest rate of 6.5% and there is no processing fee. I have invested the money 8 months before. This is a one year plan. I'm happy about the services provided by the ICICI for this account
      Was this review helpful? 1
      , thane
      Reviewed on Jan 04, 2019
    • Corporation Bank Fixed Deposit
      "Average"
      0.5 4.0/5 "Great!"
      I had account with Corporation Bank and its very old one. I put fixed deposit before 3 to 4 years. The interest rate was around 7% which was minimum compared to others but am satisfied. I have deposited for 5 years. Actually have not taken any benefits, just have invested. The customer service was okay.
      Was this review helpful? 3
      , pune
      Reviewed on Jan 04, 2019
    • HDFC Bank Fixed Deposit
      "Good service"
      0.5 4.0/5 "Great!"
      I do have a fixed deposit account with HDFC Bank. They are giving good interest. I can manage this account on line. I have chosen HDFC because of bank financial is good. I have just started long time, The process was very quick and it was done through on line.
      Was this review helpful? 3
      , thane
      Reviewed on Jan 02, 2019
    • SBI Fixed Deposit
      "Best Investment plan"
      0.5 5.0/5 "Blown Away!"
      I have taken fixed deposit account in State Bank Of India . They are not charging any charges for the account . I used to get income tax benefits . Am satisfied with the customer service and response.They are giving good rate of interest . Overall am happy with my account .
      Was this review helpful? 3
      , ahmedabad
      Reviewed on Dec 29, 2018
    • review Fixed Deposit
      "Good online features on FD"
      0.5 5.0/5 "Blown Away!"
      In Saraswat bank they are providing the interest around 7% per annum, the minimum amount Rs. 5000 to max, still my FD is running with this bank. The online options are excellent without visiting I can track the interest and deposit amount through online.
      Was this review helpful? 1
      , pune
      Reviewed on Dec 17, 2018
    • HDFC Bank Fixed Deposit
      "Convenient FD with HDFC"
      0.5 5.0/5 "Blown Away!"
      In HDFC I can deposit for minimum of Rs. 5000 to max amount. I done the investment of one time payment around Rs.6 lakhs. I can chose the tenure period based on the convenient, it gives the interest of 7% its maximum. I can open and close the account through online.
      Was this review helpful? 4
      , pune
      Reviewed on Dec 17, 2018
    • SBI Fixed Deposit
      "Very Good Service"
      0.5 4.0/5 "Great!"
      I had made this investment pretty long time back and the services which they had provided so far has been good. The interest rate with them has been good and the growth with the investment has also been good. Their customer support has been helpful in guiding with everything.
      Was this review helpful? 8
      , bangalore
      Reviewed on Dec 14, 2018
    • YES Bank Fixed Deposit
      "Excellent Service"
      0.5 5.0/5 "Blown Away!"
      It has been a good service which they had been providing so far and i had started this investment a log time back. Their customer support has been helpful in guiding me in the investment plans and explaining with the growth of the investment. The interest rate with them has also been good.
      Was this review helpful? 3
      , bangalore
      Reviewed on Dec 14, 2018
    • Citibank Fixed Deposit
      "Not satisfied with the service"
      0.5 1.0/5 "Really Bad"
      I had started this investment a pretty long time back and they had been providing a good service. Their customer support has not been responsive and i do not suggest any one to make an investment through them. There has not been a good growth with the investment.
      Was this review helpful? 1
      , bangalore
      Reviewed on Dec 14, 2018
    • SBI Fixed Deposit
      "Good Investment Plan"
      0.5 4.0/5 "Great!"
      I have taken fixed deposit account in STATE BANK OF INDIA . They are not charging any charges for the account . I used to get income tax benefits . Am satisfied with the customer service and response.They are giving good rate of interest . Overall am happy with my account .
      Was this review helpful? 4
      , mumbai
      Reviewed on Dec 12, 2018
    • Post Office Fixed Deposit
      "Good investment plan"
      0.5 5.0/5 "Blown Away!"
      I have started investing in the fixed deposit almost more than 5 years. I have invested a variable amount in different times. They have offered me a interest rate of 7.5%. The response was good. I have chosen the post office because of the safe and security.
      Was this review helpful? 12
      , guwahati
      Reviewed on Dec 12, 2018
    • YES Bank Fixed Deposit
      "Excellent service"
      0.5 5.0/5 "Blown Away!"
      I have the fixed deposit account with the Yes bank and the interest rate they have given me is good, also the customer service is good too they have co-ordinated with me well they time to time update me about there date of pay my next fixed deposit date.On line banking services are fine one too and am really happy with them.
      Was this review helpful? 0
      , ahmedabad
      Reviewed on Dec 11, 2018
    • Axis Bank Fixed Deposit
      "Average bank to avail fixed deposit"
      0.5 4.5/5 "Excellent!"
      I have chosen the Axis bank for my fixed deposit. I have deposited around of Rs. 50000. Since they are providing very good services in their branch. They have offered me a interest rate of 6.5%. I put the money in 2015. I have visited their branch many times and the service is very much prompt. I had no issues with them.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Dec 11, 2018
    • ICICI Bank Fixed Deposit
      "Satisfactory"
      0.5 5.0/5 "Blown Away!"
      My fixed deposit is with ICICI Bank. I had to go to the bank and meet the executive and open the account. I can close the account online. There is a lock in period for 12 to 13 months. The interest I earn is satisfactory. I have a deposit of 70K. Overall good.
      Was this review helpful? 0
      , new delhi
      Reviewed on Dec 07, 2018
    • Punjab National Bank Fixed Deposit
      "Good Investment Plan"
      0.5 5.0/5 "Blown Away!"
      I have taken fixed deposit account in Punjab National Bank . They are not charging any charges for the account . I used to get income tax benefits . Am satisfied with the customer service and resonance.They are giving good rate of interest . Overall am happy with my account .
      Was this review helpful? 1
      , new delhi
      Reviewed on Dec 06, 2018
    • DHFL Fixed Deposit
      "Online features should be improved for FD"
      0.5 3.0/5 "Satisfactory"
      They are providing amazing interest of 8.2% on FD account, I done the investment of Rs. 50,000 I done pre matured , I withdrawal the amount it has locking period of 3 month they didn't give any interest, draw back in DHFL, for fixed deposit account opening, we have to visit to the branch, the same procedure to close the FD.
      Was this review helpful? 2
      , hyderabad
      Reviewed on Dec 04, 2018
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