Low Risk Investment: PPF, FD, RD

 

My last post was about various types of investment. In this post you will get brief about PPF, FD & RD

Below listed type of investment is less risky as compare to investment in stock & mutual fund hence returns from this investment is also low.

 

A)  Public Provident Fund (PPF)

 

Why it is popular?

It is used by most of the individual as tax-saving schemes

Where to open?

It can be opened in a designated post office or a bank branch. It can also be opened online with few banks.

Minimum & Maximum amount?

Minimum amount to keep account active is Rs 500 & Maximum amount that can be deposited in a Financial year is Rs 1.5 Lakh.

Bhai Interest kitna milega?

Approx. 7.1% per annum (as of April 2020). Good News!!! Interest tax free hai.

Advantage

1.       Avail loan from third year onwards.

2.       Your money is absolutely safe.

3.       You can open an account on behalf of a minor if you are guardian, and claim the tax              benefits for yourself.

4.       Income is fully exempt from income tax.

5.       Provide income tax deduction under section 80C for amount invested subject to limit of       Rs 1.5 Lakhs.

Disadvantage

1.       The Tenure of the PPF scheme is 15 years, which make it less attractive for older people.

2.       Although partial withdrawal is allowed from 7^th year , it is Limited to 50% of the balance     in your account at end of the 4^th year.

 

B) Bank Fixed Deposits (FD)

 

Why it is popular?

Most of the Indian household do investment in FD.

 

Where to open?

You can open it in any bank. Some bank may allow you to open an FD account without having to open a saving bank account.

 

How it work?

At maturity, you are entitled to receive the principal amount as well as the interest earned at the pre-specified rate during that period.

 

Interest?

Rate of interest depend on the maturity period of the FD & the amount invested & it varies from bank to bank. Interest received is taxable.

 

Note: For senior citizen the rate of interest is roughly 1% more than normal interest.

            Advantage

1.       It is safest investment

2.       You can avail 75% to 90% loan against your FD

3.       It is totally risk free provided FD is with nationalized bank or well repute bank.

Disadvantage

Growth in your investment very low/slow.

 

C)  Recurring Bank Deposits

 

Why it is popular?

It is a powerful tool for regular savings.

 

            How it works?

1.       You invest a specific amount in a bank on a monthly basis for a fixed rate of return.

2.       The deposit has a fixed tenure, at the end of which you get your principal sum as well as        the interest earned during that period.

Where to open?

The account may be opened either offline by visiting a bank where you have a saving account or by logging on the bank’s net banking.

You can open account in Post office too.

Interest bhaaya??

Again same as FD it depend upon how much amount you are investing, maturity period & it varies from bank to bank. Interest received will be taxable.

Advantage

1.       You can set aside a fixed amount every month for savings.

2.       It is safe.

3.       It is best for service class & Self employed person.

4.       By fulfilling certain conditions, one can apply for a loan against a recurring bank deposit.

Disadvantage

1.       Growth is relatively slow.

 

Hope you guys got some brief idea about this 3 investment type. In which type to invest totally depend certain factor such as:- available amount, time, tax advantage, your future goal, etc. 

 

                                                                               (pic source:- relakhs.com)

PPF vs FD vs RD