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    PPF Vs FD

    We spend a vast portion of our lives trying to make money, working long hours, putting in the extra effort just to make enough money to lead a decent life. Earning money can be a pretty mundane job on occasions, but we still do it, not only for our present but to secure our future as well. In a lot of cases, making the right investment choice becomes harder than actually earning the money itself, with people blowing up their hard earned money on wrong investments. These investments could make or break our future and it pays to choose them wisely. With respect to India, Fixed Deposits and Public Provident Fund (PPF) are two extremely popular investment options, each vying to attract investors with a slew of benefits and features.

    Fixed Deposits and Public Provident Fund can be considered as two sides of the same coin, offering multiple benefits while retaining their individual characteristics. So which option is better? Fixed Deposit or PPF? Here are a few points about both of them which might help solve the confusion.

    1. Maturity or Lock in Period – The Lock in period refers to the time duration before which an investment reaches its maturity. Public Provident Funds come with a maturity period of 15 years, an extremely long time period indeed. Fixed Deposits on the other hand can have lock in periods ranging from 7 days to 10 years, depending on the needs of an individual, thus offering more flexibility in terms of planning for the immediate future.
    2. Interest Rates – The interest rate on PPFs is fixed by the Government and only the government can change this rate. The current interest rate on PPFs stands at 8.7% per annum. The interest rates on Fixed Deposits are fixed by individual banks and an individual could stand a chance to get a higher interest rate by doing a quick survey. Most banks offer an interest rate ranging between 8.5-9% per annum, with some banks going higher, depending on the age of investors and the term period. Company Fixed Deposits offer higher interest rates, ranging anywhere between 12-13% per annum, but come with an element of risk attached to them.
    3. Premature Withdrawals – Premature withdrawal facility is available in case of PPFs, but only after the 5th year and subject to a limited extent only. Most banks allow premature withdrawals of fixed deposits but can levy a certain fine on such premature withdrawals, depending on bank policy.
    4. Loans – Emergencies can come knocking at any time and a loan can often quell the emergency temporarily. Loans can be obtained against PPF from the third year onwards. In case of Fixed Deposits, most banks offer an overdraft facility which can be as high as 90% of the amount in the FD. The interest is generally 2% points higher than the interest rate offered on the FD.
    5. Tax Deduction – Individuals can claim a tax deduction on certain investments under Section 80C of the Income Tax Act, with both Public Provident Fund and Tax Saving Fixed Deposits eligible for such deductions. The current maximum deduction available for both these investments stands at Rs 150,000 (One lakh fifty thousand) per annum.
    6. Investment Amount – The maximum amount an individual can invest in PPF is limited to Rs 150,000 per year, which makes PPFs lose out on individuals who wish to invest higher amounts. There is no such limit when it comes to investing in Fixed Deposits, with certain banks accepting investments in crores, depending on the individual bank policy.

    FD or PPF? Where to invest?

    Both Fixed Deposits and Public Provident Funds offer an extremely safe investment opportunity to individuals, offering decent returns on maturity. The choice of investment boils down to individual requirements, with Fixed Deposits trumping Public Provident Funds in terms of flexibility in term periods and slightly higher interest rates. The fact that individuals can avail loan facilities against Fixed Deposits without having to wait for the three year period as is the case with PPFs makes them a better short term investment option.

    Individuals who wish to have both a short term and a long term investment option can choose to invest in both Fixed Deposits and PPFs, provided they have the luxury of time on their side.

    How to open a Fixed Deposit Account or Public Provident Fund Account?

    Investors have the option of choosing between two kinds of Fixed Deposits, Bank Fixed Deposits and Company Fixed Deposits. Bank Fixed Deposits can be opened with any bank which offers this facility with benefits including overdraft facility, lock in periods to suit individual needs, etc. All an individual has to do is fill out the application form and submit it to the bank, along with the necessary documents.

    Company Fixed Deposits are offered by companies wherein investors can deposit money with the company for a fixed time period. These Fixed Deposits offer a higher interest rate but are considered risky, with returns highly dependent on the company’s performance. Company Fixed Deposits can be opened easily by filling out the application form and providing the relevant documents.

    A Public Provident Fund Account can be opened in post offices and select nationalized banks. Individuals need to fill out the application form and submit the relevant documents to open this account. The account can be transferred from the post office to the banks by just submitting a request for the same.


    It takes a lifetime of hard work to earn money but a single moment of recklessness can see it disappear. Investing in Fixed deposits or PPFs ensures that our hard work doesn’t go to waste and our money continues to grow stronger, so that it can be there for us when we truly need it. The benefits offered by both FDs and PPFs are unique, and not investing sensibly could very well signal the start of a rapid downhill journey.

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