Difference between Fixed Deposit and Public Provident Fund

Fixed deposit

• It is a financial instrument provided by bank to the investor
• It tends to provide higher interest rate than a normal saving account till the maturity period arrives.
• In fixed deposit scheme, money cannot be withdrawn before maturity.
• The interest rate varies from 4 to 11 %
• The tenure of an FD can vary from 10 days to 10 years.
• Usually in India the interest on FDs is paid every three months from the date of the deposit.
• Fixed Deposits does not have any minimum and maximum limit of investment.
• In India fixed deposit interest rate varies from bank to bank.
• Interest on fixed deposit is a taxable income.
• Taxable income Rebate on Fixed Deposits amounts cannot be availed in the financial year of investment

Public Provident Fund

• Public Provident Fund (PPF) is tax-saving instrument in India
• The interest rate provide on PPF is generally 8% which is changed by government  time to time.
• PPF has maturity period of 15 years
• Pre-mature withdrawals can be made from the end of the sixth financial year from when the PPF commenced.
• PPF has minimum investment limit of Rs 500 per year and maximum of Rs 60,000 per year.
• Interest on Public Provident Fund is tax free.
• The interest on PPF is calculated from 5^th day of month to last day of the month
• Rebate from taxable income can be availed in the financial year of investment.
• PPF is beneficial for the investor who are looking for long term investment.
• Loan facility is available against both fixed deposit and Public provident fund schemes.

Know About Demand Draft

It is also known as Tele Cheque

It is an Account payee instrument

A Demand Draft is a kind of Cheque which do not require the signatures of a customer on it

The information that is required for demand draft to be cashed are-

Bank account number of customer.

Bank routing number (nine digit number used to identify a financial institution in a transaction, they can also be found on online banking sites of the financial institution.)

Demand draft is much safer than a normal Cheque because it do not carry the signatures of the customer.

Usually colleges and universities require payment of application fee to be done through a  DD which is a safer way as compared to  a Cheque, In this case, the student would apply to his bank to get a DD issued favoring that particular college. 

Suppose the bank which issues DD for college to the student known as Drawer branch located in Mumbai and the bank which will accept DD for the college in Bangalore known as Drawee branch and the college is called payee

Usually the DD will carry the name/code of the Drawee branch and of the Drawer branch both. The placements of this varies from bank to bank.

The bank would charge the customer for creation of DD, in the form of a commission. Hence the customer has to pay an amount equal to (DD amount + Commission + Service Tax).