When planning to invest your hard earned money into a smart instrument that gives you assured returns, ignorance is certainly not bliss. We often hear about different financial instruments from our friends, family and acquaintances but we seldom have in-depth knowledge about them. It is important to acquaint yourself thoroughly about the merits and demerits of an investment plan before making an informed decision.
Let’s look at them closely:
Fixed deposits (FD) and Public Provident Fund (PPF) are two investment avenues we all have come across in our lives. These are two of the most popular investment instruments in the market today for risk-averse investors. However, these are as different as chalk and cheese and must be understood in detail.
Fixed deposit has remained a traditional hallmark of savings in India primarily because of its low-risk nature. A fixed deposit simply means a sum of money deposited for a specific duration. You can opt for a fixed deposit either through banks or non-banking institutions. When you open a company fixed deposit with Bajaj Finance for example, not only do you enjoy high credibility and safety, you can also benefit from a high interest rate, flexible tenure and a minimal investment amount.
Investments made in a tax saver FD are eligible for claiming tax deduction under 80C up to the maximum value of Rs. 1.5 lakh. Moreover, you have the choice to receive the interest on your deposit either cumulative, or non-cumulatively –– either monthly or quarterly for the tenure you choose. A bank fixed deposit of a higher amount will attract a higher interest rate.
You can open a fixed deposit account easily nowadays with most banks and non-banking financial companies giving you the choice to complete the entire process online. For example, Bajaj Finserv Fixed Deposit can be opened almost instantaneously in a hassle-free way. There is minimal documentation required and the approval process is as easy and swift.
You can enjoy a higher rate of interest than you would get on the same amount in a savings account. It is important to note here that usually, non banking companies offer more attractive interest rates than other banks. For instance, a fixed deposit with Finserv MARKETS can fetch you an interest rate as high as 8.60%
You steer clear of any risk that is intrinsic to a volatile financial market.
Gives you a convenient option to create wealth over the years for a safe, carefree retirement
You can choose a tenure for your fixed deposit account to suit your requirements
You can avail a loan against your fixed deposit in case of a financial emergency
You can opt for multiple fixed deposits with the same or different banks
You are free to draw your fixed deposit amount prematurely during times of a financial emergency
You can save on paying taxes with your fixed deposit under Section 80C
An investment as popular, if not more, as fixed deposits in our country. The PPF is another good option for investors who do not want to take risks. The Public Provident Fund is a financial scheme of the government framed under the PPF Act of 1968. The PPF is a government-supported, long-term small savings scheme which was designed to provide retirement security to self-employed individuals and workers in the unorganized sector. It enables you to enjoy the comfort of a safe corpus while giving you tax-free rate of returns. Your investments to the PPF account will earn a tax-free interest and the maturity amount will also be exempt from income tax.
In a PPF, you require a tenure of 15 years. After 15 years, you can extend the account in a block of five years. However, all fixed deposits give you the freedom to choose your tenure and your corpus doesn’t need to be locked down for such a long period. For instance, Bajaj Finance offers you FD tenures ranging from 12 to 60 months. Thus, you get the flexibility to choose the investment period for FDs, which you cannot with a PPF.
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. This stands in contrast with FD in which you can freely withdraw the money any time you want
As in the case of FD, PPF also gives you the option to avail loans but only after the completion of the third year. However, you can get a loan against FD at any point of time.
You can earn tax benefits on both PPF and FD under Section 80C. However, in case of FDs, you have to invest for a minimum period to avail the income tax benefit.
You can only invest 12 times in a year in your PPF account, with the maximum yearly investment capped at Rs. 1.5 lakh. With FDs, there is no such limit.
The rate of interest for PPF is set by the government of India while FD has rates of interest determined by set by individual banks and NBFCs. This rate, however, is influenced by the repo rate cuts of the Reserve Bank of India, the country’s apex banking institution.
So, as you can clearly see, both fixed deposits and public provident funds offer you a range of benefits upon investment. Largely, fixed deposits look more attractive as they offer you greater flexibility in dealing with your corpus. However, when choosing between these two widely popular investment instruments, you must be mindful of your own requirements. Before investing in either of the two, think about a few things: what are your liquidity requirements, risk profile, interest rate expectations, investment objective and also take note of the inflation rate. Both FD and PPF are credible investment tools to successfully plan one’s life post retirement. They are both risk-averse, giving you the comfort of assured returns regardless of market fluctuations. So, choose what best serves your financial interests and enjoy safe returns.
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