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Fixed Deposits vs PPF: Which is better?

Fixed Deposits or Public Provident Fund? 

Both Fixed Deposits and Public Provident Funds offer an extremely safe investment opportunity to individuals, offering decent returns on maturity. The choice of investment boils down to individual requirements, with Fixed Deposits trumping Public Provident Funds in terms of flexibility in term periods and slightly higher interest rates.


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So which option is better? Here are a few points about both of them which might help solve the confusion.


  • Interest rates : The interest rates on the Public Provident Fund is always likely to be better than bank deposits, although there is a revision every quarter. Currently, PPF gives you an interest rate of 8.1 per cent, while you get a mere 7.5 per cent in public sector banks.
  • Taxation on interest Bank deposits are fully taxable. The interest earned on them is added to the total income of a person for the purposes of paying tax. The interest earned on the PPF is tax free. Sec 80C Tax benefits If you invest up to Rs 1.5 lakhs, you get tax benefits under Sec 80C for the PPF. Most of the bank deposits do not offer you this facility, unless it is the tax saving deposits.
  • Long-term Goal:  Due to its long tenure of 15 years, the PPF helps you to build a solid retirement corpus.
  • Liquidity:  The one advantage of the bank deposit over the PPF is that it is more liquid. It can be en cashed before expiry, which is not available in the PPF. Partial withdrawal is allowed only after 7 years in the PPF.
Conclusion: If you want to build a retirement corpus with interest that is tax free, the PPF is a good proposition over the bank deposit.

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