The following table illustrates the key differences between PPF and Tax-saving Fixed Deposit (FD):
|
Basis |
Public Provident Fund (PPF) |
Tax Saving Fixed Deposit(FD) |
|
Lock-in period |
15 years |
5 years |
|
Returns |
8% |
6.50% - 8.25% |
|
Minimum Investment |
Rs. 500 |
Rs. 100 |
|
Loan facility |
Available |
Not available |
|
Premature withdrawal |
Allowed |
Not Allowed |
|
Taxation |
Exempt from tax for investment of upto Rs. 1,50,000 per annum |
Tax deducted at source applicable |
Therefore, investing in PPF is a better option if the individual has a long term horizon in mind since it is tax free, 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.
