Saving Schemes That Are Just A Click Away: Public Provident Fund (PPF) Vs Fixed Deposits (FDs)

If you're earning and just hoarding money in bank accounts or worse still, spending all of it, it is not the wisest of financial decision. Dave Ramsey, businessman and author of some of the best-selling financial planning and wealth-making self-help books, said, "You must gain control over your money or the lack of it will forever control you." So before you spend your money, you should first think of saving it. What you're left with is what should help you plan your expenses, financial planners often say. In fact, regular investment in small savings schemes is one of the good investment ideas to choose from. In fact, small saving schemes like public provident fund (PPF) and fixed deposits (FDs) can be opened conveniently and offer good interest rates.
 
After fixing your savings in public provident fund accounts and fixed deposit accounts, you can just forget all about it and let it mature so that it gives you good returns on maturity.
 
Given below are details about public provident fund (PPF) and fixed deposit (FD) accounts:
 
Public provident funds (PPF)

Public provident fund accounts are offered by major banks of the country. These days, banks even let you create a provident fund account online, in a paperless hassle-free way. The money is then automatically deducted from your savings bank accounts.
 
Interest rate on PPF accounts: Interest rates on small saving schemes like PPF accounts are decided every quarter. The current interest rate is 7.6 per cent per annum. The interest is compounded annually.
 
Income tax benefit: Public provident fund deposits qualify for deduction from income under Section 80C of the Income Tax Act.
 
Premature withdrawal: Withdrawal from PPF accounts is permissible every year from seventh financial year from the year of opening of the account.
 
Loan facility: Subscribers can avail loans against PPF deposits from the third financial year.
 
Fixed Deposits (FDs):

Fixed deposits or FDs offer attractive interest rates as compared to savings accounts. All banks including State Bank of India (SBI), ICICI Bank, HDFC Bank, Punjab National Bank (PNB) and Axis Bank offer the option of opening fixed deposit accounts. FD accounts can be opened online via internet or phone banking services of banks.
 
Interest rates on FD accounts: SBI, HDFC Bank, ICICI Bank, PNB and Axis Bank offer as much as 7 per cent on their fixed deposit accounts. Small finance banks like Fincare Small Finance Bank, AU Small Finance Bank, and Equitas Small Finance Bank offer interest rates that are as high as 9 per cent.

However, interest rates on FDs vary according to the tenure, period of investments and also according to banks.  
 
Income tax benefit: Investment under a five-year fixed deposit qualifies for income tax benefit under Section 80C of the Income Tax Act.
 
Premature withdrawal: FDs are of two types: 1) Regular FDs come with a premature withdrawal facility 2) FDs with 5-year or 10-year lock-in periods offer income tax benefits. Premature withdrawal is allowed by banks usually after a penalty.