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Which Is Beneficial: FD Or EPF?

Money, it is that one thing around which our lives and the world revolve. Everything we do in our lives is either directly or indirectly connected to the act of earning, saving or spending money, with money ruling the roost in our day-to-day activities. Money is the harbinger of news, sometimes good and sometimes bad, turning normal people into Gods, wielding power like no other weapon. The fact is that there is no modern world without money, unless we are all willing to give it all up and lead the life of a hermit.

Fixed Deposits and Provident Funds are two popular investment and saving tools in India, both offering multiple benefits to people. Provident Funds are government- supported retirement planning schemes, wherein individuals have the opportunity to invest in different kinds of provident funds. 


So which investment opportunity is better? FD or EPF. The following points could possibly help YOUR money hold its value during financial needs.

1. Know the Terms

  • Fixed Deposits are accounts offered by banks wherein individuals can deposit money into the account for a particular time period. These deposits are generally payable only when the term is completed.
  • Employee Provident Fund is a provident fund for employees of companies, which is designed to provide financial stability post retirement.

2. Eligibility Criteria

  • Fixed Deposits: FDs can be opened by all residents, including minors, if they meet the eligibility criteria of the bank they wish to apply in. A few companies offer Company Fixed Deposit, which are open to individuals and are governed by the rules of the company.
  • EPF: Individuals who are employees of organizations are eligible to open an Employee Provident Fund account.

3. Investment / Lock in Period

The lock in period refers to the time duration involved for a particular investment to reach its maturity value.

  • FD: The Investment / Lock-in period for FDs depends on the needs and requirements of the individual account holder. The investment term could range from 7 days to 10 years, offering flexibility and ease of handling to the investor.
  • EPF: The EPF is active till the individual concerned is an employee of the organization. The invested amount can be paid either at retirement or on resignation.

4. Interest Rates

The interest rate offered on investments is often the biggest deciding factor when choosing which option to pick. Bank fixed deposits offer interest rates ranging between 8.5 to 9% per annum, with company fixed deposits offering much higher rates, often ranging between 12-13% per annum. The interest rates are fixed by the individual bank or company concerned and often reflect the competitive nature of business.

The interest rates for EPFs are fixed by the government and currently stand at 8.75% per annum. These rates can be revised only by the government at its sole discretion.

5. Tax Benefits

It so happens that we often feel reluctant to part with our hard-earned money, but paying tax is the duty of every individual who falls in the tax bracket. While one cannot avoid tax completely, FDs and PFs offer us the chance to reduce our tax burden to an extent. Individuals can claim deduction under section 80C of the Income Tax Act in case of Tax Saving Fixed Deposits, with the maximum deduction being Rs.1.5 lakh.

Investments towards EPF are also eligible for deduction under Section 80C. Withdrawals from EPF are, however, taxed if the individual has been employed with the same employer for less than 5 years.

6. Investment amount/contribution

Planning for the future is an extremely crucial aspect of investing and miscalculating the investment amount could leave us hanging in the future. FDs have no limit on the investment amount, with the investments depending on the capability of the individual concerned. Some banks are open to investments running into crores, with the investment amounts being subject to the policies followed by the banks.

In the case of EPF, both the employer and employee are expected to contribute 12% of the basic and DA every month. The contribution can be increased as per the needs of the employee. 

7. Premature withdrawals

Most banks allow premature withdrawals of Fixed Deposits, subject to the policies of the bank and can charge a certain fine on such premature withdrawals.

Premature withdrawals are permitted for EPF, though the premature withdrawal of EPF with service less than five years would attract tax deductions, ranging from 20% to 34%, depending on certain conditions.


A lifetime of hard work could dematerialize in one reckless moment and life isn’t always kind to provide second chances. Investing in the right plan ensures the safety of not just your money but also your family and way of life. FDs, EPFs and VPFs are unique in their own way, and not investing in them could come back to haunt us. They help our money grow with us, so that we can have something to fall back to in our old age or times of distress.

Also read-Everything You Need to Know About Post Office Savings Accounts 

What Is Term Insurance And How Does It Work? What Are The Advantages?

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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