PPF vs Bank FD: Both PPF and tax saving FD are good options for saving income tax. In this, you get tax benefits along with good returns on investment. The interest rate on PPF is reviewed by the Finance Ministry every three months. It also changes from time to time. But interest is received on FD at a fixed rate on a pre-determined period.
PPF vs Bank FD: FD has some disadvantages but PPF gives relief from income tax. FD is subject to tax on the interest received according to the tax slab of any person. But the return of FD cannot always beat inflation. That is, there is a risk of the real value of your savings falling over time. FD is not guaranteed by the government. But PPF is guaranteed by the government.
Many taxpayers choose PPF for fixed income, tax saving investment keeping in mind their retirement and their plans. Tax experts say that Public Provident Fund is best for those who are looking for long term savings with tax saving and safe investment options. On the other hand, FD gives more flexibility. It is a good option for investors. Overall, investment in PPF has to be made in the long term and this is not the case with FD.
Investing in PPF is eligible for tax deduction under Section 80C of the Income Tax Act. That is, your tax liability is deducted by investing in it. But the interest on maturity of PPF and the amount you get is tax free. For the salaried class, this is an attractive scheme in terms of tax saving.
The current interest rate on PPF is 7.1 percent for the July-September quarter. But SBI is giving 6.50 percent interest on tax saving FD.
If you make FD at a low interest rate for a long period, then you will suffer a loss if the interest rate increases. For this reason, PPF gives better returns than a five-year tax saving FD. The interest rates of FD remain stable throughout the investment period. At the same time, the interest rate of PPF is floating which can change every quarter.
PPF gives the benefit of compounding. This account matures in 15 years. After maturity, you can close the account by withdrawing the money or you can extend it in five-year periods to continue investing.
If needed, you can make partial withdrawals from PPF. In the seventh year of investment, you can withdraw money for needs like medical treatment, emergency or children’s education or marriage. FD is a good option for short investment period. But PPF is the best in the long term.
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