FD vs PPF

The table below shows a comprehensive overview of the FD vs PPF comparison. This will help you get a better idea of how these two investment options stack up against each other in various areas. 

If you are not sure which of these two investment options to invest in, a detailed FD vs PPF comparison can help you make a more informed choice. Let’s first take a closer look at each of these investment options and then move on to figuring out which is better — PPF or FD.

A fixed deposit, as the name indicates, is an account where you can deposit a fixed sum of money for a fixed tenor. This tenor can range from 7 days to 10 years for bank FDs, and from 1 to 5 years for FDs offered by NBFCs. Over the investment period, you earn guaranteed interest on your investment at the rate of interest fixed by the bank or NBFC.

Depending on when and how this interest is paid out, there are two main types of FDs, as outlined below.

• Cumulative FDs:

In these fixed deposits, the interest is reinvested in the FD account and only paid out at maturity, after the completion of the investment tenor. This gives you the benefit of the power of compounding. 

• Non-Cumulative FDs:

In non-cumulative FDs, the interest is paid out to you at frequent intervals. You can opt for monthly, quarterly, semi-annual or annual payouts. This facility helps you earn income on a steady basis. 

A big part of resolving the FD vs PPF dilemma is figuring out which is the right investment option for you. In the case of a fixed deposit, you can consider investing in this option if you meet any of the following conditions. 

• If you want to earn guaranteed interest on your investment

• If you want some flexibility with your investment tenor

• If you are looking for an investment avenue that can offer a regular source of income

To compare FD vs PPF comprehensively, it’s also important to know if PPF is the right investment option for you. Investing in the Public Provident Fund may be suitable for you if you have any of the following requirements.

• If you want to invest for the long term

• If you are looking for tax-saving investments 

• If you do not want any regular source of extra income currently

When it comes to PPFs, the interest that is to be accumulated or compounded is done on a yearly basis. This works for all PPF deposits. For fixed deposits, the interest is calculated through simple interest or compound interest. 

You could acquire an estimated interest return under seconds through online FD calculators or PPF calculators. You can find these tools on Bajaj Markets and can use them for free as many times as you’d like to. All you have to do is enter a few basic variables surrounding your investment and you can acquire an estimated and indicative number within seconds.  

The lock-in period of investment tenor is a key parameter to consider if you’re comparing PPF vs fixed deposits. 

FDs have more flexible tenor options. If you open an FD with a bank, your tenor options range from 7 days to 10 years. In case of fixed deposit plans offered by NBFCs, the tenor can range from 1 year to 5 years. Only tax-saving FDs have a lock-in period of 5 years. 

In the case of PPF, however, the lock-in period of 15 years is non-negotiable. That said, partial withdrawals can be made after the completion of five financial years (excluding the first year) from the year in which you made the initial investment. Also, you withdraw up to 50% of the balance once per year. 

So, when it comes to FD vs PPF, fixed deposits offer more liquidity and flexibility of tenor.

The answer to this depends on what you are looking for financially. For instance, if you are keen on having an investment option that offers more liquidity, fixed deposits may be more suitable. 

The PPF is a secure option, but it does not offer any liquidity for a minimum of five years. Even after this period, only partial withdrawals are allowed once a year. Hence, FD is a more liquid option when compared to PPF. Premature withdrawals, both partial and full, can be availed at any point in time, subject to a nominal penalty.

Similarly, if you want more flexibility in the tenor options, FDs can be easily customised to meet your financial needs. You can apply for an FD on Bajaj Markets in a hassle-free manner and enjoy benefits like a fast online application process and higher interest rates.

On the other hand, if you want more tax benefits or if you are looking for a long-term investment avenue, PPF may be a better choice. 

As you can see, both fixed deposits and the PPF have their own upsides. You can make a choice based on what you need financially. Consider the investment horizon of your financial goals, the reasons you are investing, the returns you expect and other such factors before you make a choice.