FD Vs PPF- From 7 days FD you can do FD for 1 year, two years, 5 years or 10 years, but the maturity of PPF is only in 15 years.
Fixed Deposit (FD) and Public Provident Fund (PPF), which is better if you have to choose between these two investments? But, can these be compared? Because, there is a big difference in the interest of both investments. You are getting interest of 2.90-6% in FD of bank and post office. At the same time, talking about PPF, 7.1% interest is being received in the last four quarters and the current quarter.
From a 7-day FD, you can do 1-year, two-year, 5-year or 10-year FD, but PPF maturity is only in 15 years. After 5 years premature withdrawal can be done with PPF. The common thing about these two investments is that both are considered low risk investments. Returns are guaranteed, interest is compounded and tax is also saved – these are the three benefits, which makes FD and PPF the preferred investment despite falling interest.
Which PPF or FD to choose?
Investing in PPF can be a better option if you have a long time. There are two reasons – first that you get more returns here than FD and secondly, your deposits, interest and returns in PPF are not taxed on all three. In addition, PPF investment also provides section 80C exemption of income tax. At the same time, if you talk about FD, only 5 years tax saving FD gets 80C of income tax exemption, but you have to pay tax on maturity. The FD earnings are linked to your income and tax has to be paid according to the slab.
This is how you will earn in a 5-year FD of Rs 10,000
How much did the 5-year FD earn?
| SBI | Kotak Mahindra Bank |
| Rate of interest | 5.40% | 5.30% |
| Lump sum investment | Rs 10,000 | Rs 10,000 |
| Deposit after 5 years | Rs 13,007.78 | Rs 12,946.19 |
After 5 years, when you withdraw the matured amount, you will be paying so much tax.
How will it be taxed?
| Deposit after 5 years | Rs 13,007.78 | Rs 12,946.19 |
| 10% tax slab | Rs 12706 | Rs 12651 |
| 20% tax slab | Rs 12405 | Rs 12356 |
| 30% tax slab | Rs 12104 | Rs 12062 |
FD will be seen in terms of tax. Investor Founder Shweta Jain says that even if you invest in FD or in 15-year PPF, there is a risk of falling interest in both, but if both of you are more important for the protection of the original capital, then both these options are good for you. Just see how long you can invest for a short time horizon, choose FD and invest for a longer period, then invest in PPF. Up to 1.5 lakhs can be invested in it every year.
