DA hike takes central staff's dearness allowance to 63%; how SIP, PPF and FDs compare

The Centre has announced a dearness allowance (DA) increase for 2026 for government employees just ahead of Diwali. After the hike, the total DA for government employees stands at 63%. The government has also announced a Diwali bonus for some employees.

The question now is where to put the extra money. For those planning to invest this Diwali, there are four routes: mutual funds, bank fixed deposits (FDs), post office FDs and the Public Provident Fund (PPF). The choice, in effect, is between SIP, PPF and FD.

Government employees who expect to receive a larger sum can start investing on the basis of this information. All of these are considered good savings options. Those planning to invest a larger amount should consult an investment adviser. Only basic information on how to invest is given here.

For mutual funds, an annual rate of 12% over five years has been assumed. On Rs 20,000, the estimated interest is Rs 15,246.83 and the total maturity value Rs 35,246.83. On Rs 50,000, the estimated interest is Rs 38,117.08 and the total Rs 88,117.08. On Rs 80,000, the estimated interest is Rs 60,987.33 and the total Rs 1.40 lakh or more. On Rs 1,00,000, the estimated interest is Rs 76,234.17 and the total Rs 1.76 lakh or more.

A bank FD offers 6.40% a year for three years. On Rs 20,000, the estimated interest is Rs 4,091.00 and the total Rs 24,091.00. On Rs 50,000, the interest is Rs 10,227.51 and the total Rs 60,227.51. On Rs 80,000, the interest is Rs 16,364.01 and the total Rs 96,364.01. On Rs 1,00,000, the interest is Rs 20,455.01 and the total Rs 1.20 lakh or more.

A post office FD offers 7.50% a year for five years. On Rs 20,000, the estimated interest is Rs 8,712.59 and the total Rs 28,712.59. On Rs 50,000, the interest is Rs 21,781.47 and the total Rs 71,781.47. On Rs 80,000, the interest is Rs 34,850.35 and the total Rs 1.14 lakh or more. On Rs 1,00,000, the interest is Rs 43,562.93 and the total Rs 1.43 lakh or more.

For PPF, a rate of 7.10% a year for one year has been assumed. On Rs 20,000, the interest is Rs 1,420.00 and the total Rs 21,420.00. On Rs 50,000, the interest is Rs 3,550.00 and the total Rs 53,550.00. On Rs 80,000, the interest is Rs 5,680.00 and the total Rs 85,680.00. On Rs 1,00,000, the interest is Rs 7,100.00 and the total Rs 1.07 lakh or more.

On which option suits whom, the advice is as follows. For those who want to invest for the long term, a SIP or a lump-sum investment in mutual funds is a good route, since the longer the money stays invested, the greater the benefit of compounding. Those who do not wish to take market risk can put their money in fixed deposits (FDs) or the PPF scheme.