Which investment should women choose: PPF or FD
What's the story
Investing is crucial in financial planning, but choosing between Public Provident Fund and Fixed Deposits can be confusing for many in India.
Both provide security and guaranteed returns.
This article explores how PPF and FD address the financial goals and concerns of women investors, offering insights for making informed decisions.
Longevity
Understanding PPF: A long-term commitment
PPF accounts mature after 15 years and currently offer an attractive interest rate of around 7% to 8%.
This long-term commitment is advantageous for women who are saving for retirement or long-term goals like children's education.
The magic of compounding interest over a decade and a half means your initial deposit grows significantly. This is an excellent choice for those with a long-term perspective.
Flexibility
The flexibility of fixed deposits
Fixed Deposits provide flexibility, ranging from seven days to 10 years with attractive interest rates of 3% to 7%.
This is ideal for women aiming for short- to medium-term goals such as weddings, buying that dream car, or preparing for emergencies.
The ease of liquidation in FDs guarantees that you can quickly access your funds when required.
Taxation
Tax implications: PPF vs FD
PPF provides tax efficiency under Section 80C of the Income Tax Act, permitting deductions up to ₹1.5 lakh per year.
Both interest and maturity proceeds from PPF are exempt from tax.
On the other hand, FD interest is subject to tax based on the individual's tax slab, which can reduce returns for those in higher brackets.
Security
Safety concerns addressed
Both PPF and FD are secure investments. PPF, being backed by the Government of India, carries practically no risk.
On the other hand, FDs are insured only up to ₹5 lakh by DICGC. Any investment beyond this is subject to the risk associated with the bank.
Women who want absolute security may prefer PPF for larger investments.
Adaptability
Tailoring investments to life stages
Women's financial priorities change with life stages: single, married, mom.
- Initially, the liquidity and short commitment of an FD are perfect for carefree singles.
- As responsibilities grow, adding PPF to your portfolio provides long-term security and benefits.
- This is ideal for later career stages when stability is more important.