Difference Between Recurring Deposit and PPF: Where to Invest?

Recurring Deposit (RD) and Public Provident Fund (PPF) are both popular options for savings in India. Both of them have different advantages and setbacks. Choosing one ultimately depends on an individual’s financial goals and needs. Hence, it is important to know about the key differences that set them apart from each other. Read till the end to find out more about recurring deposit vs PPF! 

Key Differences Between a Recurring Deposit vs PPF 

Here is a table outlining the key differences between PPF vs Recurring Deposit:

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What is a Recurring Deposit (RD)?

Before we dive into their key differences, let us first explore the meaning of recurring deposit and PPF. A recurring deposit is a type of term deposit offered by financial institutions. It is a great low-risk investment option, which comes with guaranteed returns. When investing in an RD, an individual pays a fixed sum amount on a monthly basis. The interest is compounded quarterly and offers fixed returns. Some of the features of this type of investment are - 

• Options of a flexible tenure
• Requires a monthly investment
• Beneficial instrument for both short and long-term goals
• Gives an assured wealth generation according to the selected term

Types of Recurring Deposit Accounts

Here is a list of some common types of RDs available out there. These are important to consider when determining recurring deposit vs PPF:

• Regular Accounts

This RD scheme is available in a vast majority of Indian banks. One can open this type of account upon becoming 18 years old. The offered tenures and the minimum deposit sum differ from bank to bank when opening this type of account. 

• Senior Citizen Accounts

RDs are eligible to be opted by senior citizens as well. This type of RD account provides a much higher rate of interest. The interest amount gets compounded quarterly. 

• Accounts for Minors

There are a few banks that allow individuals under the age of 18 to open RD accounts. This is, of course, done under the guidance of guardians and parents. 

• NRE/NRI RD Account

Banks also provide NRE (Non-Resident External) and NRI (Non-Resident Indians) to open recurring deposit accounts. They get to earn a significant amount of interest by making small investments monthly.

What is a Public Provident Fund (PPF)?

A Public Provident Fund is a savings scheme in India backed by the government, ensuring both security and steady growth. Although the returns may not always be very high, this option provides stability and consistent earnings over the long term.

Here is a list of key features of PPF that individuals can benefit from:

• Higher PPF interest rate of up to 7.1% yearly
• Minimum tenure for this investment is 15 years
• Ideal for individuals seeking tax benefits
• Backed by the government, it ensures risk-free return 

Which Is Better: Recurring Deposit vs PPF?

Choosing between RD and PPF requires a lot of consideration regarding various factors. It ultimately depends upon your financial plans and goals. Here are a few factors you need to keep in mind while making your choice:

• Considerations of Tax Deductions

If tax deductions are your main concern then PPF will be a better option for you. This is because the PPF returns are not taxable as per the Income Tax Act Whereas when it comes to RD, it is subject to taxation based on your income tax slab.

• Financial Goals

When prioritizing financial goals, both RD and PPF serve different purposes. RD is ideal for building an emergency fund or saving for immediate needs, as it offers liquidity and steady returns. On the other hand, PPF is better suited for retirement planning, as it provides tax benefits, compound growth and capital security over an extended period.

• Duration of Investment

A long-term investment generally yields higher returns. If maximizing interest rates is your goal, PPF is the better choice due to its compounded growth and tax benefits. On the other hand, RD is ideal for short-term investments, helping you systematically accumulate savings over a shorter period while maintaining liquidity.

• Risk Tolerance Capacity

PPFs are a better option for investment than RDs as they carry a much lower risk. They are backed by the government as well and this makes them a much safer option to opt for. If security is something you look for when investing, then definitely opt for PPF. 

Final Word 

Now that we are done covering recurring deposit vs PPF, there’s another safe investment option that you could opt for, known as fixed deposits. By investing in FDs from Stable Money, you can earn attractive interest rates of up to 9.5%. Start investing today and secure your financial future with stable and assured returns!