Forget Public Provident Fund (PPF), some Fixed Deposit (FD) plans offer higher interests! Should you invest?

Public Provident Fund or Fixed Deposit? The dilemma has increased more in the wake of rising interest rates on FDs. In some of the Fixed Deposit schemes, banks are offering nearly 9% interest rate, while PPF interest rate was recently revised to 8% by the government. 

Should you go for higher interest rate offered by FDs or trust the PPF to grow your wealth for later use? Your answer should be primarily based on your needs. Here are a few critical differences between PPF and FD that will help you make a better choice:

- PPF is a long-term investment plan. It has a minimum lock-in period of 15 years, which can be further extended in blocks of five years each on request. This is not the case with FDs. 

 - Fixed Deposit can be made for periods starting from 7-14 days up to 10 years. 

- There is one interest rate on PPF deposit which is revised periodically by the government. FDs of different tenures have different interest rates. 
 
- The PPF investment, interest and maturity amount qualifies for tax rebate while only five-year FDs help save tax. 

- In PPF, loans and withdrawals are permitted depending upon the age of the account and balances as on the specified dates. In FDs also, loan facility is available. SBI provides this on up to 90% of the principal amount of the term deposit.

- Premature closure of FDs is normally allowed. In case of PPF, the government currently allows premature closure of a PPF account on specified grounds upon completion of five financial years from the date of opening of account. 

- A minimum of Rs.500.00 subject to a maximum of Rs.1,50,000 per annum may be deposited in a PPF account. 

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With the above, it is clear that PPF is good for those can afford to be invested for a long-term. At the current rate of interest, the maximum investment of Rs 1,50,000/year in PPF can return up to Rs 4,723,056 in 15 years and help save tax also.

In FDs, you can deposit a lump sum only once for a fixed period of time. In subsequent years, you will have to open another FD account for making an investment in FDs.