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Tag: PPF vs FD

  • Public Provident Fund (PPF) vs Fixed Deposit (FD): Which is best?

    Depending on an individual’s funding targets, mounted deposit (FD) and Public Provident Fund (PPF) will be wonderful choices for saving and investing. Before making a selection, buyers ought to have in mind the distinctions between the 2 varieties of accounts as a result of they’ll each provide tax benefits and the prospect to earn curiosity in your investments.

    Mumbai-based tax and funding professional Balwant Jain mentioned PPFs are greatest for these on the lookout for long-term financial savings with tax advantages and a protected funding choice. FDs, however, give extra flexibility and liquidity. 

    PPF contributions are certified for tax deductions underneath Section 80C of the Income Tax Act. The curiosity earned and the maturity quantity are tax-free. This is the one debt instrument that enjoys an exempt-exempt-exempt (EEE) standing.

    Investing in financial institution mounted deposits is taken into account to be protected and is a well-liked funding software. The post-tax return on such investments is mostly decrease than the financial institution’s provided rate of interest “Individuals in greater tax brackets can not declare the TDS again by submitting their Income Tax Return (ITR), leading to a decrease post-tax return from mounted deposits,” said Amit Gupta, MD, SAG Infotech.

    Public Provident Fund (PPF) vs Fixed Deposit (FD): Interest rates

    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. 

    How is the interest on FDs and PPFs calculated?

    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.

    Public Provident Fund (PPF) vs Fixed Deposit (FD): Liquidity

    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 15-year period has expired, a complete withdrawal is permitted. “If you are looking for liquidity then opt for FD depending on the requirement as it offers various tenors ranging from seven days to ten years. In the case of PPF, the tenure is quite long, 15 years. It’s best suited for retirement corpus,” mentioned Balwant Jain.

    Public Provident Fund (PPF) vs Fixed Deposit (FD): Risk

    In the case of FDs, the Deposit Insurance and Credit Guarantee Corporation (DICGC) protects your cash as much as ₹5 lakh per depositor per financial institution. PPF can also be a low-risk funding selection as a result of it’s absolutely backed by the federal government.

     

     

     

     

     

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    Updated: 10 Jul 2023, 02:52 PM IST

  • Public Provident Fund (PPF) vs Fixed Deposit(FD): Which is healthier for traders

    When evaluating the PPF and FD as funding choices in India, it is necessary to contemplate varied elements. 

    Advantages of PPF

    The PPF, being a government-backed financial savings scheme, supplies a number of benefits. 

    1)Firstly, contributions to PPF are eligible for tax deductions underneath Section 80C of the Income Tax Act, which can assist cut back your tax legal responsibility.  Additionally, the curiosity earned and the maturity quantity are tax-free, making it a lovely choice from a tax perspective. 

    2)PPF can also be thought-about a protected funding since it’s backed by the federal government, offering a way of safety to traders.

    3)“PPF provides a 7-year lock-in interval and a 15-year deposit period, making it an interesting long-term investing choice. An individual could proceed to take action indefinitely in blocks of 5 years after the preliminary 15 years have handed,” said Vinit Khandare, CEO and Founder, MyFundBazaar

    4)Another advantage of PPF is that it allows for partial withdrawals and offers loan facilities after the completion of the 7th year, providing some degree of liquidity during emergencies or financial needs, said Amit Gupta MD, SAG Infotech.

    5)A PPF account can be opened with a minimum investment of Rs. 500 and a maximum investment of Rs. 1,50,000 every fiscal year.

    6)For a period of 15 years, individuals may deposit money into their PPF accounts at least once annually.

    On the other hand, FDs offer their own set of advantages.

    Advantages of FD 

    1)They provide flexibility in terms of tenure options, allowing individuals to choose a time frame that aligns with their specific needs and financial goals. 

    2)The interest rates that apply to fixed deposits remain constant at the rate that the individual has booked the FD, independent of changes in the market. This guarantees fixed returns upon maturity, said Khandare

    He added that depending on the investment goal, a person may choose between short- and long-term fixed deposits. The term can be for as little as seven days or as long as ten years.

    3)“FDs also offer a regular income stream in the form of fixed-interest payments, which can be useful for individuals seeking a predictable cash flow,” stated Amit Gupta.

    Moreover, FDs are simply accessible and will be opened with varied banks and monetary establishments, making them a handy funding choice, he added.

    4)Most banks present a better mounted price of curiosity to aged of us. As a end result, it permits senior residents to save lots of extra money with out taking any dangers.

    5)Tax-saving mounted deposit plans can support in lowering revenue tax obligations. Section 80C of the Income Tax Act of 1961 permits traders to assert tax exemptions as much as a most of Rs. 1,50,000.

    6) Cumulative FDs that compound curiosity each six months, three quarters, or month-to-month. This ensures larger returns on the principal sum.

    “However, it is necessary to contemplate the drawbacks as properly. While PPF provides tax advantages, FDs are topic to tax on the curiosity earned as per the person’s tax slab. Additionally, FD returns could not all the time outpace inflation, which suggests the actual worth of financial savings would possibly lower over time. It’s essential to take inflation into consideration when evaluating the potential returns from FDs. Furthermore, FDs should not assured by the federal government, though deposits as much as Rs. 5 lakh per financial institution are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC),” stated Amit Gupta MD, SAG Infotech

    Ultimately, the selection between PPF and FD is determined by particular person preferences, monetary targets, danger tolerance, and liquidity necessities. PPF fits people searching for long-term financial savings with tax advantages and a safe funding choice. On the opposite hand, FDs provide extra flexibility and liquidity, making them appropriate for people who could require entry to their funds within the shorter time period. It’s all the time advisable to judge your particular wants, contemplate the professionals and cons, and seek the advice of a monetary advisor to make an knowledgeable choice that aligns along with your monetary aims.

    PPF’s newest rate of interest

    The Public Provident Fund (PPF) is without doubt one of the well-liked long-term funding schemes backed by the Government of India. PPF provides an rate of interest is 7.1%.

    Latest financial institution FD rates of interest

    Axis Bank, State Bank of India, and ICICI Bank provide ain rates of interest starting from 3% to 7.1% on tenures maturing in 7 days to 10 years, whereas HDFC Bank offers rates of interest starting from 3% to 7.25% on these deposits to normal clients.

    Disclaimer: The views and proposals made above are these of particular person analysts, and never of Mint. We advise traders to verify with licensed consultants earlier than taking any funding selections.

     

     

     

     

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    Updated: 14 Jun 2023, 01:56 PM IST