If you’re someone who prefers safe and steady returns on your money, you’ve likely considered and Public Provident Fund (PPF). Both are popular choices among conservative investors who don’t want to take much risk with their savings.
Let’s say you have a total investment portfolio of Rs 2 crore. You might want to keep at least 40%, which is around Rs 80 lakh, in low-risk options like PPF, FDs, bonds, or debt mutual funds. These help your money grow slowly but steadily, even when the market isn’t doing well.
Now, let’s compare FDs and PPF based on key factors:
Most banks currently offer interest on PPF, on the other hand, currently offers a fixed interest of 7.1%.
So, in terms of returns, PPF is either at par or slightly better than FDs. However, FD rates can vary depending on how long you keep your money invested.
In a PPF account, you can invest a minimum of Rs 500 and up to Rs 1.5 lakh in a financial year. That’s the limit.
FDs have no upper limit. Whether you want to invest Rs 50,000 or Rs 5 crore, FDs can handle it. This makes FDs more suitable if you’re dealing with a large amount of money.
By investing in PPF, you can claim a tax exemption of up to Rs 1.5 lakh under Section 80C in a financial year, under the old tax regime. Moreover, the interest you earn from a PPF account is also tax-free.
FDs, however, do not offer any tax deduction unless it’s a 5-year tax-saving FD, and even then, the interest you earn is taxable.
This is where FD wins. PPF has a lock-in of 15 years. You can’t fully withdraw your money before that, although partial withdrawals and loans are allowed after a few years.
FDs are far more flexible. You can choose the tenure, ranging from a few days to several years, and withdraw whenever you want (though early withdrawal may attract a small penalty).
If you want tax-free returns and can lock your money away for the long term, PPF is a great choice. If flexibility and large investments matter more, FDs are better.
Meanwhile, combining PPF and FDs wisely offers both stability and growth. Use PPF for long-term, tax-free savings, and FDs for emergencies or short-term plans, thereby making your overall investment safer and more efficient.