PPF Account: Check Features, Tax Benefits, Interest Rates Comparison With Bank FD

Public Provident Fund (PPF) and Bank Fixed Deposit (FD) are two popular savings options in India. While FD offers fixed returns, PPF provides higher returns and several additional benefits. Let’s compare the features, tax benefits, and interest rates of PPF with Bank FD to help you make an informed investment decision.

Key Features of PPF:

1. Investment Amount: Investors can deposit as low as Rs 500 and up to Rs 1.5 lakh per year in their PPF accounts.
2. Investment Tenure: The investment period for PPF is 15 years. However, account holders have the option to extend the tenure in blocks of five years after the completion of 15 years.
3. Tax Benefits: PPF offers tax benefits under the Exempt-Exempt-Exempt (EEE) category. The principal amount, interest earned, and maturity amount are all tax-exempt.
4. Eligibility: Any resident Indian adult can open a PPF account, and guardians can invest on behalf of minors or individuals of unsound mind.

PPF Interest Rates:

The government recently maintained the interest rate on PPF at 7.1% per annum.

Comparison with Bank FD:

When comparing PPF with Bank FD, it’s important to consider the interest rates offered by different banks. Currently, HDFC Bank offers FD rates ranging from 3% to 7.10%, Axis Bank offers rates between 3.50% and 7.75%, and SBI offers rates from 3% to 7%. Senior citizens may receive an additional interest rate of 50 basis points (bps).

PPF Withdrawal Options:

1. Premature Withdrawal: After completing five years, PPF account holders can make one partial withdrawal per financial year, up to 50% of the balance at the end of the fourth preceding year or the previous year, whichever is lower.
2. Maturity Payment: After 15 years, account holders can submit an account closure form along with the passbook to receive the maturity payment.
3. Account Extension: Alternatively, account holders can choose to retain the maturity value in their account and continue earning interest. They can also make one withdrawal per financial year. Within one year of maturity, they can extend the account for a block of five years by submitting the prescribed extension form.

In conclusion, PPF offers several advantages over Bank FD, including higher interest rates, tax benefits, and flexible withdrawal options. Individuals looking for long-term investments with tax advantages and higher returns may find PPF to be a suitable choice. However, it’s important to consider your financial goals and risk appetite before making an investment decision.