Should you invest in a Public Provident Fund or a Fixed Deposit?
As convenient and safe form of savings, we look to invest either in Public Provident Fund (PPF) or Fixed Deposit (FD). Although both are investment instruments, the differences between PPF and FD are substantial, and each comes with its own set of features that make them unique for customers.
Did you know? Bajaj Finance is now offering interest rates up to 6.50% for non-senior citizens and an additional 0.25% rate benefit for senior citizens. What's more? Online investors can benefit from 0.10% extra rate benefit. (not applicable for senior citizens) - Invest Online
Features and Benefits of PPF and Fixed Deposits
Here’s a brief comparison of different aspects of PPF and FDs:
With PPF, the amount you invest will be locked in for 15 years. PPF doesn’t offer any other tenor to customers, so their amount remains locked in for 15 years.
Bajaj Finance offers you FD tenors ranging from 12 to 60 months. Thus, you get the flexibility to choose the investment period for FDs, which you cannot with a PPF.
- Premature withdrawal
When you invest in a PPF, you get to withdraw the amount only after completion of the fifth year and that too, up to a limited amount.
Bajaj Finance enables you to withdraw an FD prematurely after a minimum lock-in period of 3 months. You can also avail a loan against your Fixed Deposits.
- Loan facility
You can avail loans against your PPF only after the completion of the 3rd year. However, you can get a loan against FD at any point of time.
Get loans up to 75% on cumulative FDs and up to 60% on non-cumulative FDs, when you invest in Bajaj Finance Fixed Deposits.
- Deposit amount
The maximum amount deposited with a PPF is limited to Rs. 1.5 Lakh per year. With FDs, there is no fixed limit.
In this case, if you ask – PPF or FD which is better, the answer will be FD.
- Rate of interest
The rate of interest for PPF is set by the Government while that of FD is set by the individual bank or NBFC.
To help you compare the differences between the two, here’s a table to help you understand the differences between investing in a PPF or a Bajaj Finance FD:
||Public Provident Fund (PPF)
||Bajaj Finance Fixed Deposit
||Investment is locked in for at least 15 years
||Flexible tenors from 1 to 5 years, with re-investment option
||Withdrawal is possible only after 5th year
||Withdrawal is possible after minimum lock-in period of 3 months
||Tax benefits under Section 80C
||Bajaj Finance doesn’t
||Loan can be availed only after completion of third year
||Easy loan against FD facility available at anytime
||Maximum amount deposited is limited to Rs. 1.5 Lakh per year
||No upper limit on deposit amount
|Rate of interest
||7.1% for Q3 FY 20-21
||Range from 7.00% to 6.85%, basis tenor and interest payout frequency
As FD comes with more flexibility, it is the winner in this PPF vs FD battle. Invest with a minimum of Rs. 25,000 in Fixed Deposit with Bajaj Finance and get FD interest rates up to 7.00%, with 0.10% additional rate benefit on investing online and 0.25% additional interest rate for senior citizens.
Which is better FD or PPF?
A Fixed Deposit has more flexible features than a Public Provident Fund which makes FD a slightly better investment option. Nonetheless, customers can choose the befitting plan, offered at Bajaj Finance, by evaluating both through the following differences:
- Tenor: An FD offers flexible tenors ranging from 1 to 5 years, whereas a PPF has fixed term of 15 years.
- Rate of Interest: Interest rate for a PPF is set by the government, currently 7.1% for the financial year 20-21. For an FD, interest rate at Bajaj Finance ranges from 5.65% to 6.75%, based on selected plan.
- Withdrawal: After a minimum lock-in period of 3 months, an FD is open for pre-mature withdrawal. In case of PPF, money can be withdrawn early, only after the fifth year and up to a limited amount.
- Tax Benefits: Under Section 80 C of the Income Tax Act, PPF falls under Exempt-Exempt-Exempt (EEE). Bajaj Finance doesn’t offer any Tax Benefits on FD.
- Loan Facility: Loan against PPF can be availed after the culmination of 3rd year. Against an FD, loan facility is attainable at any point of the tenor.
- Deposit Amount: FD has no fixed upper limit, but once invested no extra funds can be inducted into the same FD. For a PPF, maximum Deposit amount is ₹1.5 Lakh per year.
Which is better RD or FD or PPF?
FD is better than PPF because of its more flexible attributes and it is better than RD because it offers higher interest rates. Among RD, FD and PPF the best instrument for investing your money is different for every customer. Consider the following factors to select the best plan for you:
- PPF is a reliable long term investment plan (lock-in period is 15 years), generally opted as a retirement plan for saving and growing funds. Both, FD and RD, are short term investments, with flexible tenors.
- Interest rates for PPF are determined by the government, whereas RD and FD rates are set by our NBFC.
- There is no pre-mature withdrawal in case of PPF. Both, FD and RD, are open for pre-withdrawal upon fulfilling requisite conditions.
- FD enables input of deposit amount once in the beginning. A PPF has a limit of deposit of Rs. 1.5 lakh per year. RD offers to select a minimum amount to be deposited at frequent intervals.
- Loan can be drawn against an FD at any juncture of the tenor. Against PPF, loan is obtainable only after the 3rd year. No such alternative is available for RD.