Why to Choose PPF over Bank Fixed Deposit? 5 Reasons

Bank Fixed Deposit (FD) is a very popular saving scheme in India. There are multiple causes which favour investing in bank FD such as guaranteed fixed returns, liquidity, easy to open and lower risk to the investors. But now-a-days, as the bank FD rates are coming down day-by-day, investors need to look for some other better alternatives to invest their savings.

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Investment in a PPF Account is very beneficial for the PPF Account Holders. PPF is very popular investment instrument among all the money-saving avenues available for investment due to its flexible nature. The balance lying in PPF account is not subject to attachment under any order or decree of court.

There are following 5 major reasons as to why to choose PPF over bank fixed deposit:

(1) Better Returns

PPF offers you better returns than bank FDs. Moreover, the rate of interest is known to you in advance. The interest declared is guaranteed.

(2) Tax Free Earnings

The total funds you receive after the duration of 15 years in PPF (principal and interest) are totally tax free. You do not have to pay any tax on it.

In case of bank FD, the interest earned is taxable.

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(3) Tax Rebate under Section 80C of Income Tax Act

The money deposited in the PPF account is eligible for getting a rebate under Section 80C of Income Tax Act. An amount of maximum upto Rs 1.50 lakhs can be deposited under PPF in a financial year.

Bank FD for a period of less than 5 years is not eligible for any tax rebate.

(4) Premature Withdrawal

Premature amount is allowed for withdrawal after the 5th year from the investment which is subject to a limited extent only.

(5) Availability of Loan

Loan is available against your PPF investments from third year onwards whereas there is no provision of loan in case of bank FD.

Above reasons have been mentioned so that you can get to know why investing in PPF is better than that of bank FD. However, you must know that in case of PPF investment, your fund will be locked for 15 years. So you should choose the investment instrument according to your objectives.

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