Fixed Deposit (FD) Vs Public Provident Fund (PPF)

Fixed Deposit (FD) Vs Public Provident Fund (PPF): Which is Better?

PPF and FD plans are considered to be safe investment option among financial institutes in India. Both the options help investors save for long-term goals, and are invested in an easily accessible mode and with guaranteed returns over time. But choosing between the two can be confusing as each one has its own benefits and drawbacks. In this article, we will compare PPF versus FDR to help you determine which one is better for your personal needs.

Fixed Deposits and Public Provident Fund are two popular options for investment. Let’s see the difference between them and which one is a better option for you to invest in.

What is a Fixed Deposit (FD)?

Fixed deposits are a conservative form of investment. The interest rate on these investments is fixed by the Government of India, hence there is no market movement associated with them. Fixed deposits are safest if you do not need access to your money for a specific period. Fixed Deposits have been popular over the past few years due to their high returns, competitive interest rates and growing demand from investors.

Benefits Offered by Fixed Deposits

The following are the benefits offered by the fixed deposit scheme:

Guaranteed Return:

Fixed deposits would be the safest investment option for someone looking for fixed returns on investments. The interest rates applicable are not dependent on the market fluctuations and remain fixed at the rate at which an individual has booked or fixed his FD. Always use a fd calculator to have better insight.

Flexible Tenure:

Fixed deposits are stated-income investments. They involve a lump sum amount and don’t bear interest as they mature over a fixed period of time. You can invest in either short-term or long-term fixed deposits based on your risk appetite, investment objective, and term preferences.

Higher Gains:

Continuous Deposit (Cumulative FD) is a safe and secure way of meeting your financial needs for the long term. The interest rate on this account increases every time the accumulated amount reaches the value of one lakh, thus guaranteeing higher gains on your principal amount.

Benefits for Senior Citizens:

Savings account is a good way to help a senior citizen accumulate larger savings, while maintaining the fixed interest rate. Most banks offer a higher fixed rate of interest to senior citizens compared to other age groups.

Regular Source of Income:

By providing the option of a monthly payout, many FDs can act as an additional stream of income for people. This can be a steady source of money and allows investors to set aside funds for future financial needs.

Tax Saving:

Investors have an option of investing in tax saving fixed deposits in order to save tax liability. There are mainly two types of fixed deposit schemes available. Tax-Shielded FDs offers a lock-in period of 2 years and a higher interest rate. Tax-free FDs do not offer any lock-in period but you can make withdrawals at any time after the completion of 15 days from the date of deposit.

What is a Public Provident Fund (PPF)?

PPF, also known as the Public Provident Fund scheme, is a long term savings instrument for individual and corporate accounts. PPF is a hybrid instrument designed to encourage savings with safety and liquidity. The rate of interest varies every year. It is linked to the government bond rates and therefore fluctuates based on the same. Investing in PPF provides tax benefits under Section 80C of the Income Tax Act of 1961.

Benefits Offered by Public Provident Fund (PPF)

Let’s take a look at the benefits offered by Public Provident Fund (PPF):


A PPF account is a long-term investment instrument of the government of India. This has a tenure of 15 years and provides a lock-in period of 7 years. After the completion of 15 years, an individual can extend it indefinitely in blocks of 5 years.

Investment limit:

Anyone can invest in a PPF account by opening it through the bank for a minimum deposit of Rs 500. With no upper limit, you may deposit as much as Rs.1.5 lakhs per financial year in a PPF account.

Wrapping it UP!

People who are looking for a long-term option of investment along with the benefit of tax saving should consider investing in PPF. On the other hand, those who want to accumulate a fund for a short period of 5-10 years should consider investing in FDs. The decision whether to invest in FDs or PPF entirely depends on the objective and future goals of an individual.

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