3 min
16 August 2024
Investing is the only way of multiplying wealth and growing a large pool of savings that you can dip into when required. However, with many investment options available in the market choosing the right one can be daunting. Out of a plethora of options available, two popular investment tools in India are mostly preferred due to their safe nature. Fixed Deposits (FDs) and Public Provident Funds (PPFs) both tools offer a safe way to grow your savings and earn interest over a specified tenure. Read on to know more about both of these investment avenues and which one would suit you best.
Comparison between PPF and Fixed Deposit:
Here is a comparison table showing the difference between PPF and FD.
Particulars |
Fixed Deposit |
Public Provident Fund |
Applicable interest rate |
Fixed throughout the tenure |
Changes based on market climate |
Tenure |
12-60 months generally |
15 years |
Min. deposit |
Depends on financier |
Rs. 500 |
Max deposit. |
Depends on financier |
Rs. 1.5 lakh/year |
Risk |
Low |
Low |
Taxable returns |
Yes |
No |
To get a better understanding of the difference between FD and PPF getting a clear picture of each tool is necessary.
What is a Fixed Deposit (FD)?
A Fixed Deposit is a sound financial instrument that is offered by banks, post-offices, and Non-Banking Financial Companies (NBFCs). It is a tool where you deposit a corpus of savings for a fixed tenure at a fixed rate of return and get a lump sum at maturity. Bajaj Finance is one such financier that offers the highest safety of funds as well as handsome returns. You can also opt for a non-cumulative payout where you get returns periodically.
Features and benefits of the Bajaj Finance Fixed Deposit:
a. Safe investment option for risk-averse investors
Bajaj Finance online Fixed Deposit has been credited with the highest safety ratings of (AAA) and (AAA) by CRISIL and ICRA respectively. These are the leading credit rating agencies in India.
Bajaj Finance online Fixed Deposit has been credited with the highest safety ratings of (AAA) and (AAA) by CRISIL and ICRA respectively. These are the leading credit rating agencies in India.
b. High FD interest rates
Bajaj Finance offers fixed deposit interest rates up to 8.40% p.a. for citizens aged below 60. Senior citizens, the rates can go up to 8.65% p.a.
Bajaj Finance offers fixed deposit interest rates up to 8.40% p.a. for citizens aged below 60. Senior citizens, the rates can go up to 8.65% p.a.
c. Loan against FD facility
Bajaj Finance FD offers a loan against the FD facility. You can easily get a loan of up to 75% of your FD value.
Bajaj Finance FD offers a loan against the FD facility. You can easily get a loan of up to 75% of your FD value.
What is a Public Provident Fund (PPF)?
Public Provident Fund is a government-backed long-term investment scheme. This scheme was introduced to encourage individuals to save and inculcate a habit of savings for their retirement. PPF accounts are offered by banks and post offices.
Here are some key pointers about the PPF:
The minimum deposit amount for a PPF account is Rs. 500.
The maximum deposit limit per year is Rs. 1.5 lakh.
The lock-in period for a PPF account is 15 years. You cannot withdraw the entire amount before that period
The maximum deposit limit per year is Rs. 1.5 lakh.
The lock-in period for a PPF account is 15 years. You cannot withdraw the entire amount before that period
You can get tax deductions under Section 80C of the Income Tax Act for investing in PPFs.
The interest earned from a PPF account is tax-free.
Difference between PPF and FD:
PPFs and FDs are somewhat similar in nature, however, there are a few major differences between them, here is more on FD vs PPF
Applicable interest rate: Fixed deposits are a fixed-income regime. They offer a fixed interest rate throughout the chosen tenure. PPF interest rates vary and are revised regularly based on the economic climate.
Applicable interest rate: Fixed deposits are a fixed-income regime. They offer a fixed interest rate throughout the chosen tenure. PPF interest rates vary and are revised regularly based on the economic climate.
Tenure of investment/Lock-in period: Another major difference between fixed deposit vs PPF is the lock-in period, for FDs the tenure ranges between 12-60 months, for a PPF the lock-in period is 15 years.
Min and max deposit amount: Usually FDs have min and max deposit amounts differing from financier to financier, with PPFs your threshold amounts are fixed. You can make investments between Rs. 500-Rs. 1.5 L per year.
Should you invest in a Public Provident Fund or a fixed deposit?
Min and max deposit amount: Usually FDs have min and max deposit amounts differing from financier to financier, with PPFs your threshold amounts are fixed. You can make investments between Rs. 500-Rs. 1.5 L per year.
Should you invest in a Public Provident Fund or a fixed deposit?
Choosing between both a PPF and an FD ideally should depend on your income, financial goals, risk appetite, and liquidity requirements. Here are some scenarios to help you make an informed decision:
- Short-Term to mid-term goals
If you have short-term financial goals and need immediate liquidity, an FD may be a suitable choice as they offer tenures from 12-60 months. FDs like Bajaj Finance also offer special tenures, which have higher FD rates associated with them.
- Long-Term Savings
If you aim to save up for long-term financial goals like buying a house, savings for a child’s marriage or retirement planning investing in a PPF is a wise option. Since the lock-in period is of 15 years, the PPF helps in disciplined savings. It also helps in getting tax concessions under Section 80C make PPF, making this even more suitable for long-term wealth generation.
- Risk appetite
Both PPF and FDs are safe and sound investment options. FDs offer guaranteed returns as the interest rate is fixed throughout the tenure, whereas PPF interest rates vary but are generally higher than FD rates. FD is a suitable choice for those who need an exact estimate of their earnings at maturity. But if you can have your funds set aside for a longer time. However, for potentially higher returns, a PPF can be a rewarding option in the long run.
Armed with this information, you can choose between the PPF and FD depending on your income, financial goals, expenses, risk appetite, liquidity requirements and investment horizon. For those who have short-term goals and require liquidity, FDs can be the best bet. On the other hand, for those who have long-term goals like buying a home and want tax-free savings, the PPF is a much more preferred option. However, it is always better to diversify investments and keep all eggs in different baskets and also consult a financial adviser. This can help in aligning your investments with your financial goals more effectively.
With this, choosing between PPF vs FD is more simplified. Since they both have their own merits, it is necessary to choose an investment tool that suits your financial objectives the best.
