PPF Interest Rate: Everyone plans keeping in mind the future of himself and his family. But your planning is more successful when you invest in such a scheme where you get good returns. In the last few years, interest rates on FD have been increased rapidly by banks. In such a situation, the question is that if you are planning to invest then which will be better between PPF and FD?
PPF is a government supported tax saving scheme. Investing in this not only reduces your tax liability but also gives you the option to deposit funds for retirement. The tenure of PPF account is 15 years. You can extend it for another five years as per your convenience. A minimum of Rs 500 and a maximum of Rs 1.5 lakh can be invested in this on an annual basis.
To open an account, only a monthly deposit of Rs 100 is required. However, interest will not be available on any investment above Rs 1.5 lakh annually. Will not be eligible for tax saving on this amount. You will have to deposit money in the PPF account at least once every financial year for 15 years. You will have to invest at least Rs 500 annually.
Investing in PPF has a distinct advantage. In this, both your income and maturity amount are tax free under Section 80C of the Income Tax Act, 1961. At present, interest on PPF is being given by the government at the rate of 7.1%. Another advantage on this is that you get compounding interest annually.
FD is a savings scheme offered by banks and NBFCs. FD is the safest way to invest. The tenure of FD may vary depending on your investment objective. In this you can invest from 7 days to maximum 10 years. Compound interest is available on FD on half-yearly, quarterly or monthly basis.
Some FDs also offer the option of monthly payout. Such FDs serve as a reliable source of income for individuals. Additionally, tax saving FDs can help in reducing your income tax liability. Investors can claim tax exemption up to Rs 1,50,000 under Section 80C of the Income Tax Act 1961.
Ultimately, the choice between investing in PPF and FD depends on your specific saving goal. If you want a fixed income source with flexibility and better returns, then FD can be a good option. However, if you give priority to long term retirement savings along with tax benefits, then PPF may be the best option for you.
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