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Which is better – PF vs FD?

The following table illustrates the key differences between EPF and Tax-saving Fixed Deposit (FD):

BASIS

EPF

FD

Minimum Contribution

Mandatory contribution made by the employer as well as employee - 12% of salary + Dearness Allowance

Rs. 100

Return

8.65% for FY 2018-19

6.50% – 8.25%

Taxation

The employee’s contribution to EPF every year is exempt from income tax, under Section 80C. Also, the interest earned is tax exempt.

Tax deducted at source is applicable

Premature Withdrawal

Allowed

Not allowed

 Therefore, investing in EPF is a better option if the individual has a long-term horizon in mind since it provides tax benefit and aids in retirement corpus creation, and no such tax benefit is available in the case of FDs. However, if an individual wants to invest for a short term, FDs might be better.

 

 

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