Saving hard-earned money is important for future, especially for unforeseen circumstances and important life events. While many people just to keep their money in bank accounts, many invest to earn more. There are many ways available to keep the money as a saving and earn interest.The Fixed Deposits (FD) and Public Provident Fund (PPF) are among such schemes that offer customers security of their money and assured returns.
Here are the important benefits that come with these two saving schemes.
Fixed Deposits (FD)
FD is a financial instrument that pays a fixed rate of interest until a given maturity date. It provides investors with a higher rate of interest than a regular savings account and also has many other advantages that makes it a preferable investment option. FDs provide the flexibility of fixing the money over a period of time. Every bank has their own tenure criteria and one can go for FD in any of the banks, whether one holds an account or not in that bank.
All major banks and micro-finance firms offer attractive interest rates as compared to normal savings accounts. FD accounts can be opened online also. State Bank of India, HDFC, ICICI, PNB and Axis banks offer as much as 7 per cent interest on their FD accounts. Small finance banks like Fincare Small Finance and AU Small Finance offer interest rates as high as 9 per cent.Importantly, the rates differ for different banks and according to the tenure of the deposits. One can take a loan against fixed deposits.
Several FDs are exempted under Section 80C of the Income Tax Act.
In case of any need or emergency, a person can prematurely withdraw the FD with some penalty, as may be the norms of the banks.
Public Provident Fund (PPF)
PPF is tax-free, under Section 80C of the IT Act, savings platform that was introduced by the Ministry of Finance in 1968. Offering fixed and guaranteed return, government safety and being reasonably hassle-free, PPF continues to garner crores from the risk-averse investors.
The money in the PPF account is yours and nobody can take it away. A PPF account cannot be attached by a person or entity to pay off any debt or liability. Only IT department has the authority according to the rules laid down.
PPF accounts are available with all major banks of the country. PPF accounts can also be opened at post offices. The interest rates are decided by the government of India. The current rate is 7.6 per cent/annum. Interest is compounded annually.
Now, many banks offer the facility to open the account through online mode.
Withdrawal from PPF accounts is permissible every year from the seventh financial year from the year of the opening of the account and one can avail loans against PPF deposits from the third financial year.
The saving schemes, whether FD or PPF, have been important in India because of its developing nature. With government regulating these sectors, the number of people opening PPF accounts is also rising. In economics, increase in savings is a good signal for any economy.