What Are the Benefits of Investing in Provident Fund?

Public Provident Fund i.e. PPF is an investment scheme preferred by many as it provides high interest rate and tax benefits. Along with substantial returns, it also provides stability as it is backed by the Government of India.

Here are some of the key benefits of investing in a provident fund:

Easy investment method

You can deposit a bulk amount each year or deposit an amount every month such that your annual deposits do not exceed Rs. 15 lakhs. A minimum deposit of Rs. 500 each year is enough to keep the PF account running. This means the investment method is quite flexible and you don’t need to invest a huge amount to benefit from the PF scheme. 

Tax Benefits 

Tax waiver can be claimed for the entire investment as per section 80C provided that the principal amount does not cross the yearly limit of Rs. 1.5 lakhs. 

Also, no tax is levied on the interest that you earn from your PF Fund. This makes it an ideal tax-saving investment option for you.

Ideal for long term investments

In a PF account, your investment is locked-in for 15 years but you can withdraw your deposits partially from the 7th year onwards.

You can continue the PF account even after maturity by extending its tenor by 5-year blocks. Therefore, it is an investment that can provide huge benefits in the long term. 

Alternative Investment Option

However, PF is not the only instrument that provides stability and good returns over a long tenor. You can invest in a fixed deposit plan especially if you need more flexibility in terms of liquidity and investment method. Here are some of the key features of FD that makes it a lucrative option for you:

  • Flexible tenor

While the tenor of PF is fixed, an FD will allow you to pick a tenor of your choice. Therefore, you can lock-in your deposits for a few months or several years as per your financial plans. This enables you to use FDs for achieving both short term and long term financial goals. 

  • Easy withdrawal policy

You can withdraw your FDs anytime provided that it has completed the minimum deposit period as stipulated by the bank or finance company that you have chosen to invest in FDs. 

Some financiers like Bajaj Finance even provide a loan against FD that helps you to cover your immediate financial needs easily. A collateral-free loan up to 75% of the FD value enables you to use it as a contingency fund. 

  • Assured returns

Like PF, the fixed deposits are also safe as they are not linked to the volatilities of the market. The lower bank FD rates might no longer lure you. To earn better returns you can invest in corporate FDs offered by finance firms. 

For instance, Bajaj Finance FD is offering an FD rate up to 6.85% which makes it one of the highest FD rates across fixed deposit in India. A flexible tenor that ranges from 12 to 60 months enables you to plan your investments smartly. It is also a secure option as credit rating organizations like ICRA and CRISIL have given it high ratings on stability and safety. 

As a senior citizen, you can get a 0.25% extra FD rate and if you are a non-senior then you can utilize its online FD form to get a 0.10% additional interest rate. Moreover, you can use its FD calculator to predict the returns before investing. It also helps you to make better financial plans to safeguard your future.

Investing in PF is a good option as it provides assured and high returns. However, it is a long-term investment option and comes with rigid withdrawal policies. Therefore, you can also think of investing in other options like a fixed deposit that allows you to pick a tenor as per your choice. It means that it is beneficial for both short-term and long-term financial plans. As bank FDs are not lucrative, you can invest in corporate FDs like Bajaj Finance FD that is offering FD rates up to 6.85%. It also provides the flexibility of tenor and is safe as it has received high ratings on stability and safety by credit rating organizations like CRISIL and ICRA.


Gaurav Khanna is an experienced financial advisor, digital marketer, and writer who is well known for his ability to predict market trends.

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