10 Differences between PPF and FD


In the present time everyone is working hard to earn good amount of money. By doing this they want to secure their life in present time as well future time. To secure your life from any emergency situation you must develop the habit of saving at the early stage of life. Once you develop the habit of saving the very next habit you must develop is to do the investment of the saving. Now Money Dial will such you two saving options that are performing very well in the present time in term of saving, tax saving etc. They are PPF and Fixed deposit (FD).

What is PPF?

PPF stands for Public Provident Fund. It is a long term investment scheme. In this scheme the maturity is done after 15 years. By doing investment in this scheme you are building your retirement corpus. Investments in this scheme are investment in government supported securities. The minimum investment in this scheme is Rs 500 and maximum investment in this scheme is 1.5 lac in any financial year.

What is FD?

FD stands for fixed deposit. It is a kind of investment tool which is usually offered by the banks to their customers. In this the customer makes a deposit with the bank at higher interest for specific time duration. To do investment in this tool you may or may not required to create separate account.

10 Differences between PPF and FD

  1. Maturity Period:

In Public Provident Fund the maturity is done after 15 year which is fixed. However, in fixed deposit the maturity depend upon the duration for which the investment is made. The investment duration in fixed deposit start from 7 days and goes to 10 years.

  1. Extension facility:

In Public Provident Fund after the maturity which is done after 15 year, you have the option to extend the scheme. The extension is done in multiple of 5 years. However in case of fixed deposit you cannot extend. Once the maturity is done you can do again fixed deposit as per your requirement.

  1. Interest rate:

In Public Provident Fund interest rate changes after every three months. In the present time the interest rate offered by the PPF scheme is 8.1%p.a. However the interest rate offered at FD starts from 4% to 7.25%. This interest rate is offered on the deposit where the deposit amount is below 1 crore. This interest rate is applicable upto 13 August, 2016.

  1. Taxation:

Fixed deposits are fully taxable. However the interest generated from Public Provident Fund scheme is fully exempted from tax.

  1. Tax benefit under 80C:

As we have already mentioned earlier that maximum investment in PPF account in any financial year is 1.5 lac. According to section 80C of income tax Act, 1956 you would be getting tax benefit. Most of the fixed deposit does not offer any tax benefit, until it is tax saving deposit scheme.

  1. Retirement Corpus:

The investment duration in PPF scheme is 15 years, which in return help the investor to build the retirement corpus. There is no such facility in fixed deposit.

  1. Liquidity:

Fixed deposit offer better liquidity. You can liquidate the FD at any instant of time and get the get the amount. However, it is not possible in PPF. In PPF you can do only partial withdrawal.

  1. Loan Interest rate:

Due to any kind of financial emergency you can get loan from both the scheme. But loan from PPF offer many benefits like very documentation required, interest rate on this kind of loan is 1% for duration of 36 month. After 36 month the interest rate would be 6 percent. However the interest rate of loan against the FD is 2 to 2.5%.

  1. Investment Limit:

In PPF scheme the maximum investment you can do is 1.5 lac in any financial year. However in FD there is no such limit.

  1. Premature Withdrawal:

In PPF you can do premature withdrawal from the 5th year without any penalty. However, the premature withdrawal is allowed in Fixed deposit(FD)  but will attract some penalty.

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