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PPF v/s FD: Key facts and differences
29 Apr 2026

Public Provident Fund (PPF) and Fixed Deposits (FDs) are two of the most popular investment options in India.

Both are safe, but they differ in terms of returns, liquidity, and tax benefits.

While PPF is a long-term investment with a lock-in period, FDs offer flexibility in terms of tenure.

Knowing these differences can help you make better post-retirement wealth accumulation decisions.

Understanding PPF and its benefits
#1

PPF is a government-backed savings scheme with a tenure of 15 years.

It offers attractive interest rates, which are revised quarterly, but remain higher than most bank deposits.

The principal amount invested in PPF is tax-deductible under Section 80C up to ₹1.5 lakh per annum.

The interest earned is also tax-free, making it an attractive option for long-term savings.

Fixed deposits: A flexible option
#2

Fixed deposits allow you to invest for varying tenures, ranging from seven days to 10 years or more, depending on the bank.

Unlike PPF's lock-in, FDs let you withdraw partially or fully before maturity, albeit with a penalty on interest earned.

The interest rates on FDs are usually lower than PPF, but still provide guaranteed returns without market risks.

Comparing returns: PPF vs FD
#3

While PPF currently offers around 7.1% interest per annum, FD rates vary between 5% and 7%, depending on the bank and tenure chosen.

Though PPF offers higher returns over time due to compounding effects, interest calculated on the accumulated balance annually, FDs give fixed returns that help plan short-term financial goals.

Tax implications of PPF and FDs
Tip 1

Investments in PPF come with tax benefits under Section 80C, up to ₹1.5 lakh per year. The interest earned is also exempt from taxation.

On the other hand, while interest from FDs is subject to TDS if it exceeds ₹40,000 annually for individuals below 60 years (₹50,000 for senior citizens), there are no upfront tax deductions on principal investments made into FDs.