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To save income tax, PPF, or bank FD, what is the best option?


Both PPF and tax-saving FD are good options to save income tax. In this, you get good returns on investment along with tax benefits. The interest rate available on PPF is reviewed by the Finance Ministry every three months. There are changes in this from time to time. But interest on FD is already fixed at the fixed rate.

FD also has some disadvantages but PPF provides relief from income tax. The interest received on FD is subject to tax as per the individual's tax slab. But FD returns cannot always beat inflation. This means that the real value of your savings is at risk of falling over time. There is no guarantee from the government on FD. But PPF is guaranteed by the government.

Many taxpayers choose PPF for fixed-income, tax-saving investments keeping their retirement and retirement plans in mind. Tax experts say that the Public Provident Fund is best for people who are looking for long-term savings along with tax savings and safe investment options. Whereas FD gives more flexibility. This is a good option for investors. Overall, investment in PPF will have to be made in the long term and this is not the case in FD.

Investing in PPF is eligible for tax deduction under Section 80C of the Income Tax Act. That means your tax liability is reduced by investing in it. However, the current interest rate on Match PPF of PPF is 7.1 percent for the July-September quarter. But SBI is giving 6.50 percent interest on tax-saving FD. The interest on the security and the amount you get is tax-free. This is an attractive scheme for the salaried class from the point of view of tax saving.

If you invest in FD at a low-interest rate for a long period, you will suffer a loss if the interest rate increases. For this reason, a PPF gives better returns than a five-year tax-saving FD. FD interest rates remain constant throughout the investment period. At the same time, the interest rate of PPF is floating which can change every quarter.

There is the benefit of compounding in PPF. This account matures in 15 years. After maturity, you can close the account by withdrawing money or extend it for a period of five years to continue investing.

  If needed, you can make partial withdrawal from PPF. In the seventh year of investment, you can withdraw money for medical, emergency or needs like children's education or marriage. FD is a good option for short investment period. But PPF is best in long term.

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