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

Are you struggling to choose between PPF and FD scheme? The market is filled with various investment options ranging from fixed deposits to government-backed schemes. Read this article to clear the confusion.

FD vs PPF account

Building a portfolio can be a complex exercise, and to maintain it may seem cumbersome as well. Your portfolio holds different types of assets based on your financial goals, and each asset class gives different types of returns. This is why financial experts recommend an ideal mix of financial products.

Investing in Public Provident Fund (PPF) or Fixed Deposit (FD) and any other investment instrument requires basic know-how on your part as an investor. Though both are investment vehicles, some sharp differences between them are worth considering to make the right choice. In case you are wondering which one is the ideal investment option for you, this article will give you certain useful points to weigh their pros and cons.

Fixed deposit and Public Provident Fund differ substantially from each other.

Both FD and PPF investments offer a high degree of convenience to the investors. However, the differences between them are substantial. Both of them come with their own set of characteristics that are important for investors.

Here is the comparison of different features of fixed deposit and PPF


PPF investment is for a long period of time. The investment you make in PPF will be locked for 15 years. There are no other investment terms offered to the investors when it comes to PPF. On the other hand, fixed deposit comes with flexible investment terms ranging from 7 days to 10 years. While the investors can choose the duration of investment in case of a fixed deposit, it is not possible to do so when it comes to PPF.

Partial withdrawal

The amount invested in Public Provident Fund can be withdrawn only after five years. Moreover, the amount that you can withdraw is limited. Hence, you can say that you have limited control over the amount invested in PPF. On the other hand, you can withdraw the entire money invested in fixed deposit during any point of time when you come across a need. You can also close an FD prematurely or avail a loan against it.

Income tax benefit

Section 80C of the Income Tax Act, 1961 makes it possible to avail tax benefits on both FD and PPF. In order to avail tax benefit for the investment made in fixed deposit, you must invest the money for at least five years.

Loan facility

The investors can avail a loan against Public Provident Fund only after the PPF investment completes three years. On the other hand, you can avail loan against a fixed deposit at any point of time. You can get loan up to 75% of the deposit amount on cumulative FDs and up to 60% on non-cumulative FDs.

Interest rates

The interest rate on PPF is decided by the Government and only the government can modify the same. The current interest rate on PPF is 7.9% per annum. The interest rate on FDs are fixed by banks, and you could stand a chance to earn a higher interest rate by performing quick research. Most banks offer an FD interest rate ranging between 6% to 8% or higher. Moreover, senior citizens are offered higher interest rates as compared to general investors. The interest rates offered on company fixed deposits are higher, generally ranging between 10-13% per annum. However, it comes with an element of risk attached to them.

Investment amount

The maximum amount that you can invest in PPF is limited to Rs. 1,50,000 per annum, which makes PPFs lose out on people who want to invest a higher amount. There is no such limit when it comes to investing in FD schemes, with certain banks accepting investments in large volume, depending on the individual bank policy.

FD or PPF? Where should I invest?

Both, Public Provident Fund and Fixed Deposit, offer an extremely safe investment opportunity to investors with decent returns on maturity. The choice of investment depends on individual requirements, with FD trumping PPF in terms of flexibility in investment term. The fact that investors can avail loan facility against FD without having to wait for 3 years as is the case with PPF makes it a better short-term investment avenue. To maximise the income tax benefit, PPF is a promising investment option, particularly when planning your retirement. PPF is a better investment option if you are looking for an investment horizon of 15 years or more.

How to open FD account or PPF account?

Investors have the option of selecting between two types of fixed deposit schemes, i.e. Bank FD and Company FD. Bank FDs can be opened with any bank which offers this facility. All you need to do is fill out an application form and submit it to the bank, along with the necessary documents. With the digitisation, the account opening process has become easier and faster where you can open a bank FD account online with a few clicks.

Company Fixed Deposits are offered by corporates wherein investors can deposit their money with the company for a fixed period of time. These FDs generally offer a higher interest rate, but are considered risky. Though the rates are pre-decided, the returns of company FDs are highly dependent on the company’s performance. You can invest in company fixed deposit by filling out the application form and providing the required documents.

A PPF account can be opened in post offices and selected nationalised banks. You need to fill out the application form and submit the relevant documents. A PPF account can be transferred from one post office/bank to another by submitting a transfer request.

Both FD and PPF are worthy investment instruments. But, keep in mind your liquidity needs, risk profile, interest rates, inflation and investment objective before investing your hard-earned money. To accelerate the pace of your wealth creation process, you should consider diversifying your investments. Always remember to choose your investment options wisely. Adopt a need-based approach, invest in different asset-classes, whereby the risk and returns can be managed better while you endeavour to achieve your financial goals. Happy investing!

Recommended Read: Bank Fixed Deposit Rules: What You Need To Know