Public Provident Fund (PPF) vs Fixed Deposit (FD): Which is better when it comes to liquidity?
fixed deposit (FD) and Public Provident Fund (PPF) can be excellent options for saving and investing. Before making a choice, investors should take into account the distinctions between the two types of accounts because they can both offer tax advantages and the chance to earn interest on your investments. Mumbai-based tax and investment expert Balwant Jain said PPFs are best for those looking for long-term savings with tax benefits and a safe investment option.
FDs, on the other hand, give more flexibility and liquidity. PPF contributions are qualified for tax deductions under Section 80C of the Income Tax Act. The interest earned and the maturity amount are tax-free. This is the only debt instrument that enjoys an exempt-exempt-exempt (EEE) status.
Investing in bank fixed deposits is considered to be safe and is a popular investment tool. The post-tax return on such investments is generally lower than the bank's offered interest rate “Individuals in higher tax brackets cannot claim the TDS back by filing their Income Tax Return (ITR), resulting in a lower post-tax return from fixed deposits," said Amit Gupta, MD, SAG Infotech. The current interest rate on PPF is 7.1 percent (for the July-September quarter).
The government announces the rate every quarter. Interest rates on FDs typically vary from 3.5% to 7.5% annually. Regarding PPFs, the interest that needs to be accrued or compounded is carried out once a year. In the case of fixed deposits, either simple interest or compound interest is used to determine the interest rate.
If someone needs to take money out of an FD before it matures, they will be penalised. PPF permits partial withdrawals upon the completion of five years of investment. However, after the whole
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