Bank Fixed deposit (FD) vs Public Provident Fund (PPF) for Tax Saving

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Tax Saving with Fixed deposit (FD) or Public Provident Fund (PPF) - Suggested Allocation (0-20%)

FD & PPF, both are regular income earning investments, where, the investor receives a pre-determined assured return. However, there are some differences amongst the two, which has been listed below:

As it is evident, the main difference between PPF & FD is the maturity and the tax on the interest earned, which is payable in FD and exempted in PPF.

 

Ideal tax saving instrument in this scenario is NPS, although it has a long lock in period till the age of 60 years. If you plan to buy a new car in let's say next 5 years then a small proportional allocation to FD can be considered. Similarly, if you plan to buy a house let's say after 15 years, small contribution to PPF would be an option. Identification of financial goals, both long term as well as short term will be instrumental in deciding the tax saving instrument.

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