2 fixed deposit fd vs public provident fund ppf which is better

Fixed Deposits vs State Administration Funds: Which is Better

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Whether it’s to set up an emergency fund for a rainy day or to plan for retirement, establishing a solid financial plan is essential to securing the financial future of individuals and their families. When we talk about safe investment options in India, then PPF and FD are considered as popular investment options among investors. Both instruments are ideal investment choices for risk-averse investors. However, deciding, which is the better investment option can be a difficult task.

To help you make an informed decision here, we have discussed in detail the difference between Fixed Deposit and General Provisioning Fund and which is the better investment option.

What is Fixed Deposit (FD)?

Fixed deposits are savings instruments offered by banks and Non-Banking Financial Companies (NBFIs). As one of the safest investment routes, the FD interest rate is set by the Indian government, so market fluctuations have no impact on FD returns. In a fixed deposit scheme, an individual can deposit a certain amount of money at once which incurs fixed interest for a predetermined period of time.

Benefits Offered by Fixed Deposit

The following are the advantages offered by the fixed deposit scheme:

Guaranteed Return

The interest rate applied to fixed deposits does not depend on market fluctuations and remains at the interest rate that has been ordered by the individual FD. This ensures a guaranteed return at maturity.

Flexible Term

Based on the investment objectives, individuals can choose short-term or long-term fixed deposits. The term can range from a minimum of 7 days to a maximum of 10 years.

Higher Profit

Cumulative FD compound interest on a semi-annual, quarterly or monthly basis. This guarantees a higher profit on the principal amount.

Also Read :
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Benefits for the Elderly

For senior citizens, most banks offer higher fixed interest rates. Hence, it helps senior citizens to accumulate bigger savings without any risk involved.

Regular Income Source

Some FDs provide monthly payment options which can act as a source of steady income for individuals.

Tax Saving

Tax saving fixed deposit schemes can help lower income tax liability. Investors can claim tax exemption under Section 80C of the Income Tax Act, 1961 up to a maximum limit of Rs.1,50,000.

What is the State Administration Fund (PPF)?

Public Provider Fund (PPF) is an investment as well as tax saving instrument supported by the government of India. Introduced in 1968 by the Ministry of Finance, PPF is considered one of the safest long-term investment options available on the market. It was originally introduced to encourage savings among salaried individuals. PPF offers a current interest rate of 7.1%. The interest rate is set by the government of India, which is regulated on a quarterly basis. One of the main benefits of investing in PPF is that it provides a favorable return on investment along with tax deduction benefits.

Benefits Offered by the State Administration Fund (PPF)

Let’s take a look at the benefits offered by the State Administration Fund (PPF):

Length of service

PPF is an attractive long-term investment instrument with a deposit tenor of 15 years, and provides a lock-in period of 7 years. After completion of 15 years, one can extend it indefinitely in blocks of 5 years.

Investment limit

One can start investing in PPF account with a minimum investment of Rs 500 and can invest up to a maximum of Rs. 1,50,000 in one fiscal year.

Tax Saving

One of the main advantages of PPF investment is that it provides the opportunity to obtain tax benefits in the EEE (exempt, exempt, exempt) format. This means that the interest offered under a PPF account applies to tax deductions. In addition, contributions made to PPF accounts up to a maximum limit of Rs.1.5 lakh are also eligible for the U/S 80C tax exemption from the IT Act. Withdrawals made to PPF accounts are also tax-free based on wealth tax.

Also Read :
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Deposit Frequency

Individuals can make contributions to a PPF account at least once a year for 15 years.

Deposit Mode

Contributions to PPF accounts can be made by check, online funds transfer or by money order.


An individual can choose a beneficiary either at the time of account opening or later.

Fixed Deposit (FD) Vs General Operator Fund (PPF)

Let’s see the difference between PPF and FD based on different parameters-

Parameter Fixed Deposit (FD) State Administration Fund (PPF)
Issue authority Banks and NBFC Government of India
Minimum Deposit Amount Rp. 100- Rs.1000 Rp. 500
Liquidity Medium Liquidity Low Liquidity
Length of service 7 days- 10 years (20 years for some banks) 15 years (extendable in blocks of 5 years)
appropriateness HUF, Tenant, Corporation, Trust, Firm, etc. Including NRI Indian Resident
Joint Account Allowed Not allowed
Interest rate Interest rates applicable to FDs range from 2.90% to 6.5% Currently, the applicable interest rate on PPF accounts is 7.1%
Loan Against Deposit Available Available only upon completion of 3 years from the initiation date
Premature withdrawal Allowed for certain types of FD Allowed after the completion of 5 years of the account from the date of account opening
Tax on Interest Earned taxable Completely exempt from income tax
Tax Benefits on Deposits Only tax savings FDs offer tax benefits of up to Rs.1.5 lakh U/S 80C from the IT Act. Contributions made to PPF accounts up to a maximum limit of Rs.1.5 lakh apply to the U/S 80C tax deduction from the IT Act.

Wrap it up!

Both PPF and FD are profitable investment options for risk-averse investors. Individuals seeking long-term investment options along with tax-saving benefits should consider investing in a PPF account. On the other hand, if you want to accumulate funds for a short term of 5-10 years then you should consider investing in fixed deposits. The decision whether to invest in FD or PPF depends entirely on one’s investment goals and future goals.


What are the tax implications on fixed deposits?

Interest earned on fixed deposits is taxed under different income tax sheets.

What is the applicable interest rate offered by FD Paytm Payment Bank?

The applicable interest rate on the Paytm Payment Bank FD is 5.5% on maturity whereas, senior citizens are eligible for the 6% FD interest rate.

What is the interest rate offered by the current PPF scheme?

Currently, the applicable interest rate on PPF accounts is 7.1%. The interest rate is set by the government of India, which is regulated on a quarterly basis.

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