As with any investment, you should consider multiple factors to decide which is right for you. However, the important thing to remember is that the government always looks after your money. PPF is available with a low deposit amount and FDs allow you to save tax-free income. These two account types are perfect options for all sorts of investment goals. Be it short-term or long-term savings, you can use these accounts to your financial advantage.
What is a Fixed Deposit?
A fixed deposit, or FD, is a time deposit that allows the investor/holder to lock in a rate of return for a certain period of time. The most common terms are 6-18 months, but some banks offer month-to-month accounts as well. The advantage of FDs is their ease of use and liquid nature. Investors can deposit currently without any penalties, and FDs can be redeposited back into an account at any time with no loss of interest for the remaining term. That said, FDs are only recommended for short-term uses (one year or less) as they currently have a low liquidity rate.
Features and Benefits of a Fixed Deposit
Fixed deposits are a safe way to invest your money, with a host of attractive features. Banks offer different types of fixed deposits with periodic interest payouts and various pre-specified returns at maturity. You can even decide on the tenure of your FD according to your financial needs and goals. The interest rates may fluctuate with the changing economic climate, but you can rest assured that you’ll get the same return on maturity. Before investing in a fixed deposit look out for the best Fixed Deposit in India in 2022.
What is Public Provident Fund
A public provident fund is a type of savings scheme that invests your money in a variety of different instruments. It can be used to channel all your savings for various goals, such as for retirement or for specific large expenses. It’s easy to set up a PPF account, and even easier to maintain it. You don’t need a lot of money to start one, but it takes discipline to save regularly over an extended period of time. Unlike other types of accounts, you only pay taxes on the amount you withdraw from this account each year. It’s worthwhile to look into setting up a PPF account; you might benefit from the savings!
Features and Benefits of Public Provident Fund
It is necessary for a person to know about the main features and benefits of a Provident Fund. When you are opting for a PF, make sure that your employer deducts the correct amount at the time of your salary payment. When an investment is made in your PF account, do not reinvest without knowing the features and benefits of a Public Provident Fund.
The growth at around 12% is just the added bonus one gets as an employee of a company that has a Provident Fund. If you are offered to contribute only 10%, I will highly recommend contributing the whole amount, especially if you wish to plan for your retirement early in life. The earlier you start contributing, the better it is for you in terms of interest accumulated and reduced time to accumulate the wealth you desire. PPPF is one of the safest options if you wish to save your money on debt investment instruments. Even though it gives only 8% interest in comparison to a savings account which gives up to 5%, with minimal risk and maximum protection under the law, this option can also be very useful if well utilized by every individual toward their long-term goals.
Difference Between Fixed Deposit and Public Provident Fund
Fixed deposits are a type of bank deposit that comes with a fixed tenure, while PPFs are government-backed savings plans that offer tax benefits.
Here are the main difference between PPF and FD:
Tenure
Fixed deposits have a fixed tenure, which means that you cannot withdraw your money before the end of its maturity period. In comparison, you can withdraw money from PPF accounts after 15 years. However, the interest rate on PPF accounts is lower than that on FDs.
Tax Treatment
Fixed deposits are taxable while PPF accounts are tax-exempt up to Rs 1 lakh per year under section 80C of the Income Tax Act 1961.
