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:
|Basis of Difference||Bank Recurring Deposit (RD)||Public Provident Fund (PPF)|
|Objective||To induce a habit of regular saving|
|To avail tax rebate under sec 80C of|
Income Tax on deposits with guaranteed
returns on investment
|Meaning||An account in which the investor needs|
to deposit the pre-specified amount at
periodical intervals for a long term
|A long-term saving instrument|
established by the central government
which generates tax-free maturity to
provide the old-age income security
|Investible amount||In instalments- usually monthly|
|Investments in smaller and unequal units|
or in lump sum can be deposited to PPF
|Maximum Investment Amount||no such limit|
|Rs 150,000 per year|
|Interest Rates||Varies from bank to bank- dependent upon|
|Fixed- presently 8.1% p.a.|
|Interest earned is|
|Yes, as per investor's income tax slab|
|Tenure||6 months to 10 years|
|15 Years, can further be extended in|
multiples of 5 years
|Income Tax Rebate u/s 80C||No|
|Yes, upto Rs 1,50,000/- p.a.|
|Premature Withdrawals||Entire amount, anytime but after|
charging a certain penalty , banks
generally charge 1% as penalty. Partial
withdrawals are not allowed
|Can be withdrawn from 7th financial year|
onwards from the opening of the account
and only one partial withdrawal is
allowed every financial year
|Loans||Loan 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
| Loan availibility from third year|
|Tax Deduction at Source||Yes, 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).
|Risk||Risky compared to PPF|
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.