Public Provident Fund vs. Fixed Deposit Scheme: Investing wisely is crucial for financial growth. While numerous investment options exist, many still rely on government schemes or bank fixed deposits (FDs). If you’re considering Public Provident Fund (PPF) or FD, we’ll help you determine the better choice.
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Both schemes are secure and unaffected by market risks. As inflation rises, the Reserve Bank of India has increased interest rates, with banks offering 8% to 9% for long-term FDs. So, which scheme offers higher returns?
Public Provident Fund (PPF) is a government-run savings scheme with quarterly-fixed interest rates. It allows you to invest for 15 years, with a minimum of Rs 500 and a maximum of Rs 1.5 lakh. After 15 years, you can extend the scheme for another 5 years. Currently, PPF offers 7.1% interest, tax-free earnings, and a deduction of Rs 1.5 lakh under Section 80C of the Income Tax Act.
FD schemes, available in private and public sector banks, combat inflation with increased interest rates. For example, State Bank of India offers interest rates ranging from 3.00% to 6.50% on FDs of 7 days to 10 years, with senior citizens earning from 3.50% to 7.50%. HDFC Bank provides rates from 3.00% to 7% for general citizens and 3.50% to 7.75% for senior citizens on FDs of 7 days to 10 years.
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Comparing PPF and FD, PPF offers compounding returns, while FDs may use either normal or compounding interest. If you seek short-term investment, FDs are preferable. However, for long-term investments, PPF proves to be an excellent choice.
