Recurring Deposit Vs Public Provident Fund

There are times when you donít want to invest lump sum but in instalments & wish to get attractive interest rate with safety of your investible funds. On such occasions, bank RD as well as PPF can be among your various choices.

Bank RDs are offered by public sector banks, private sector banks, co-operative banks, foreign banks, regional rural banks etc. Here, you are required to invest in regular instalments which are pre-decided by you. Multiple tenure having different interest rates are there with the banks which you can opt for according to your need.

PPF gives you option to either invest in instalment or in lump sum. It is very flexible instrument where no compulsion is there. You can choose the amount of investment and when to invest as per your convenience. The only thing to remember here is that the minimum amount of investment per year is Rs 500/- and maximum is Rs 150000/- per annum. You will get tax rebate too on your investment.

Listed below in the table are all the differences between Bank RD and PPF:

Difference Between RD and PPF

Basis of DifferenceBank Recurring Deposit (RD) Public Provident Fund (PPF)
ObjectiveTo induce a habit of regular saving
Vs
To avail tax rebate under sec 80C of
Income Tax on deposits with guaranteed
returns on investment
MeaningAn account in which the investor needs
to deposit the pre-specified amount at
periodical intervals for a long term
Vs
A long-term saving instrument
established by the central government
which generates tax-free maturity to
provide the old-age income security
Investible amountIn instalments- usually monthly
instalments
Vs
Investments in smaller and unequal units
or in lump sum can be deposited to PPF
account
Maximum Investment Amount
no such limit
Vs
Rs 150,000 per year
Interest RatesVaries from bank to bank- dependent upon
tenure
Vs
Fixed- presently 8.1% p.a.
Interest Rates
Compounding
Quarterly
Vs
Annually
Interest earned is
taxable
Yes, as per investor's income tax slab
Vs
No
LiquidityYes
Vs
No
Tenure6 months to 10 years
Vs
15 Years, can further be extended in
multiples of 5 years
Income Tax Rebate u/s 80CNo
Vs
Yes, upto Rs 1,50,000/- p.a.
MaturityTaxable
Vs
Tax Free
Premature WithdrawalsEntire amount, anytime but after
charging a certain penalty , banks
generally charge 1% as penalty. Partial
withdrawals are not allowed
Vs
Can be withdrawn from 7th financial year
onwards from the opening of the account
and only one partial withdrawal is
allowed every financial year
LoansLoan facility available upto 90% of the
deposit value in the RD where the RD
needs to be pledged as collateral and
the interest rate to such loan is around
0.5% to 2% higher than the fixed deposit
rate
Vs
Loan availibility from third year
onwards
Tax Deduction at SourceYes, at the rate of 10% on interest
earned, if it exceeds Rs. 10,000 in one
financial year. To avoid TDS, investor
can submit Form 15G (for age below 60)/
Form 15H (for age above 60).
Vs
No
RiskRisky compared to PPF
Vs
Safest Investment
Periodic incomeNo
Vs
No

Upcoming Bank Holidays

2018 December 19 is a bank holiday in Goa due to Goa Liberation Day.
2018 December 24 is a bank holiday in Meghalaya due to Christmas Festival.
2018 December 25 is a bank holiday in Andaman And Nicobar Island due to Christmas.
2019 January 01 is a bank holiday in Manipur due to New Year's Day.

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