Fixed Deposit (FD) vs Public Provident Fund (PPF)

Fixed deposits and public provident funds are popular savings options for individuals seeking stability, security, and guaranteed returns. Both are designed to help you achieve your financial goals, whether short-term or long-term, while also offering tax advantages.

 

By understanding the key differences between these two investment tools, you can make an informed choice that aligns with your financial objectives and risk tolerance.

Here are some benefits you could enjoy when you invest in an FD:

Assured Returns

FDs offer guaranteed returns since the interest rate is locked in at the time of investment. This ensures financial security and predictable growth of your savings.

Flexible Tenure

You can choose from a wide range of tenures, from 7 days to 10 years. Opt for a tenure that best suits your financial goals, whether for short-term or long-term needs.

Safety of Principal

FDs are considered low-risk investments since the principal amount is secured. This may make them an attractive option for risk-averse individuals.

Loan Facility

You can borrow against your FD without breaking it. A loan against an FD allows you to pledge and borrow up to 90% of its value.

Option of Cumulative and Non-cumulative

Based on your financial needs, opt for cumulative FDs where interest is compounded and paid at maturity or non-cumulative FDs where interest is paid at regular intervals.

Here are some of the benefits of investing in a PPF:

Tax Benefits

The interest earned and the maturity amount are both tax-free.

Long-term Savings

PPF has a 15-year lock-in period, encouraging disciplined, long-term savings. This helps investors build a substantial corpus, making it suitable for retirement saving.

Attractive Interest Rates

The interest rate on PPF is typically higher than regular savings accounts and is set by the government. These attractive rates ensure your savings grow steadily over the long term.

Partial Withdrawal Facility

You can make partial withdrawals from your PPF account starting from the 7th year. This liquidity provides flexibility in case of financial emergencies.

Loan Facility

You can apply for a loan against your PPF balance between the 3rd and 6th years. This option offers financial support without needing to withdraw funds from your account.

Fixed deposits cater to a wide range of investor needs, from capital protection to predictable returns. Here’s a quick guide on who should invest in an FD:

Risk-averse Investors

This investment tool may be suitable for those who prioritise capital safety. The fixed returns and low-risk nature make them a secure choice.

Investors Seeking Fixed Returns

It offers predictable and guaranteed returns. You can estimate how much you will earn at the end of the tenure.

Individuals Needing Regular Income

Non-cumulative FDs may be preferred by those looking for a steady stream of income. The periodic interest payouts could supplement other income sources depending on the amount invested. 

Senior Citizen Investors 

Most banks and NBFCs offer special rates to individuals aged over 60 years. This additional rate is applied over the prevailing interest rate offered to non-senior citizens. 

The process of opening a fixed deposit account is simple and straightforward. Here are some steps you have to follow to book an FD on Bajaj Markets: 

1. Navigate to the fixed deposit section of the website

2. Fill in the application form with your mobile number, date of birth, and pin code

3. Enter the OTP sent to your mobile number to continue the process

4. Browse through the list of banks and NBFCs available on the platform and choose one that meets your financial needs

5. Once you select a bank or NBFC, enter the investment amount

6. Select the tenure you are comfortable with and the interest payout frequency that you prefer

7. Enter your full name and PAN card details

8. Once the KYC is complete, provide your personal details

9. Add your nominee and bank details

10. Select your preferred payment method and complete the FD booking process

This long-term investment option offers tax benefits and stable returns. Here’s a quick look at who should consider investing in a PPF:

Long-term Investors 

It may be suitable for those looking to save over a long period. The 15-year lock-in period encourages disciplined savings and the maturity amount could be used to meet long-term goals. 

Individuals with Low-risk Appetites 

This investment offers secure and stable returns, making it an attractive option for individuals seeking capital protection.

Investors Needing Liquidity

PPF is suitable for those seeking partial liquidity, as it allows partial withdrawals from the 7th year and offers loan options against the balance from the 3rd year.

Here is how you can open a PPF account at a post office:

1. Obtain the PPF application form from your nearest post office

2. Fill out the application form and submit it along with KYC documents and a passport-sized photograph

3. Make an initial deposit of at least ₹500 

4. After submitting the documents and deposit, you will receive a passbook for your PPF account

 

Note: You can also open a PPF account online through your bank's website by following the prescribed steps.