PPF vs FD: Which one will give you higher returns, which one is right for you?

Even today, many people prefer to invest in safe schemes. Safe schemes mean guaranteed returns. PPF (Public Provident Fund) and FD (Fixed Deposit) are quite popular among safe schemes.

However, both have some differences. You can withdraw money from PPF after 15 years. Its lock-in period is 5 years. However, FDs can be for a period ranging from a week to several years. Today, we will use SBI calculations to understand which FD or PPF will be more beneficial for you.

PPF vs FD: Which will be more beneficial?
You can understand which of the two investments will be more beneficial for you by using calculations. We have used SBI security calculations for the calculations.

Calculation
How much return will you get from PPF?

Investment Amount - ₹60,000 per year
Return - 7.1%
Investment Period - 15 Years

If a person invests ₹60,000 in PPF every year, they will receive ₹16,27,284 upon maturity after 15 years, based on a 7.1% return. The investment amount over these 15 years will be ₹9 lakh. Furthermore, after 15 years, you will receive ₹7,27,284 in returns alone.

How Much Will You Earn in an FD?
You can invest in an FD for a long period, such as up to 15 years:

Investment Amount - ₹9 lakh (lump sum)
Investment Period - 15 Years
Interest - 7.5%
Compounding - Every Year

If a person invests ₹9 lakh in an FD for 15 years, they will receive ₹26,62,990 upon maturity, based on a 7.5% return. The investment amount alone will be ₹9 lakh. Furthermore, you'll receive ₹17,62,990 in returns alone.

What's the benefit?
Calculations show that investing in fixed deposits (FDs) and PPFs for 15 years will yield greater returns on fixed deposits (PPFs). This means you'll receive more return on fixed deposits (FDs) because you'll receive more at maturity. However, when investing, keep in mind the frequency of compounding.

What is compounding?
Compounding is a term. When the interest earned is calculated along with the interest earned, it's called compounding. Suppose you invested ₹1 lakh in a lump sum investment. Based on the interest rate, you're now earning ₹7,000 annually. Next year, the interest will be calculated on ₹1,07,000. This is called compounding.

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