PPF vs FD for a safe long-term goal

PPF and FD rates now

The Public Provident Fund (PPF) pays 7.1% a year for October to December 2026. The rate is unchanged, and it has stayed at 7.1% since 1 April 2020. The government reviews it every quarter, so it can move later.

PPF interest is worked out on the lowest balance between the 5th and the end of each month. It is added to your account once a year. So a deposit made by 5 April earns interest for the whole year.

FD rates are set by each bank

A fixed deposit (FD) has no single rate. Each bank sets its own, and it depends on the tenure you pick. Rates also change from time to time. In this guide we use 7% a year as an example only.

Most banks compound FD interest every quarter. That makes 7% a year work like about 7.19% a year. You can see this on the FD calculator.

• PPF: one rate for everyone, set by the government each quarter.
• FD: your bank's rate, fixed for the tenure of that deposit.
• PPF deposits: ₹500 to ₹1,50,000 a year, for 15 years.

How tax changes the picture

On paper, 7.1% and 7% look almost the same. Tax is what pulls them apart.

PPF: interest is tax-free

The National Savings Institute states that PPF interest is free from income tax (section 10 of the old Act). Deposits also count as tax-saving investments in the old tax regime (old section 80C, now section 123), within the ₹1,50,000 a year limit. The new regime does not give that deduction. The interest stays tax-free either way.

FD: interest is taxed at your slab

FD interest is added to your income for the year. You pay tax on it at your slab rate. The bank may also deduct tax at source (TDS). TDS is not an extra tax; it counts towards what you owe.

So if you are in the 30% slab, 7% before tax works more like 4.9% after tax. At the 20% slab it works more like 5.6%. That gap adds up over 15 years. Check the current rules on incometax.gov.in.

₹1.5 lakh a year for 15 years: worked example

Say you invest ₹1,50,000 at the start of each year for 15 years. That is ₹22,50,000 in all. Here is what PPF and FDs could grow to, after tax.

How we worked this out (an estimate). PPF: our tested PPF module, with each deposit made by 5 April and 7.1% for all 15 years. FDs: we treat it as a ladder. Each year's ₹1,50,000 goes into a new FD that ends with the others at the end of year 15. Each FD compounds every quarter at 7%. Each year we take tax at your slab out of that year's interest, as if you paid it from the deposit. We use the slab rate only, with no cess or surcharge, and assume rates stay the same throughout. Real banks may cap FD tenure, so you might need to renew at a different rate.

You invest

₹22,50,000

PPF estimated value

₹40,68,209

FD estimated value, 30% slab

₹34,07,319

PPF ahead by

₹6,60,890

With no tax to pay, FDs at 7% edge ahead by about ₹30,000, thanks to quarterly compounding. Once tax comes in, PPF pulls clearly ahead. On the same method, an FD would need about 8.59% before tax to match PPF at the 20% slab, and about 9.78% at the 30% slab.

Lock-in and access to your money

This is where FDs win. PPF is built for the long haul, and it limits how early you can touch the money. These rules come from the PPF Scheme 2019.

1. Years 3 to 6: you can take a loan against your PPF balance.
2. From year 7: you can make a partial withdrawal, within the limits the rules set.
3. After 15 years: you can close the account, or extend it in 5-year blocks. To extend with deposits, submit Form-4 within a year of maturity.
4. During an extension with deposits, withdrawals in each block are capped at 60% of the balance at its start.

An FD is simpler. You pick the tenure, from a short period to several years. Banks usually let you close an FD early. Many pay a lower rate or charge a penalty when you do. Your bank's terms say how much.

So ask yourself: could you need this money before 15 years? If yes, keep at least part of it somewhere you can reach.

How safe is each one

Both are among the safest places for savings in India. They are safe in different ways.

PPF

PPF is a government small savings scheme, backed by the government.

Bank FDs and DICGC cover

Bank deposits are insured by the Deposit Insurance and Credit Guarantee Corporation (DICGC). Its FAQs say each depositor is insured up to ₹5,00,000 per bank, for principal and interest together. Deposits at different branches of the same bank are added together for this limit. Deposits at different banks are insured separately.

All commercial banks, including foreign banks' branches in India, are covered. So are regional rural banks, local area banks and co-operative banks. Primary co-operative societies are not insured. If your FDs at one bank are above ₹5 lakh, you could spread them across banks.

Which one to choose

There is no single answer. It depends on your tax slab and when you might need the money.

PPF could suit you if

• You pay tax at 20% or 30%, so tax-free interest matters.
• Your goal is 15 years or more away, such as retirement savings.
• You want a rate set by the government, not by one bank.

An FD could suit you if

• You may need the money within a few years.
• Your income is below the taxable limit, so FD interest is not taxed.
• You want to invest more than ₹1,50,000 a year, PPF's yearly limit.

Many people use both. PPF holds the long-term part. FDs hold money for nearer goals and emergencies. Use the PPF calculator and FD calculator with your own amounts. To see how compounding frequency changes growth, try the compound interest calculator.

Other safe options: Sukanya Samriddhi and RD

If you are saving for a daughter under 10, look at the Sukanya Samriddhi Account. It pays 8.2% a year for October to December 2026. Work out your figure with the Sukanya Samriddhi calculator.

If you would rather save a fixed sum each month, a Post Office recurring deposit (RD) runs for 5 years. It pays 6.7% a year for October to December 2026. Try the Post Office RD calculator.

Sources

• National Savings Institute — Public Provident Fund (tax, deposits)
• National Savings Institute — PPF interest rate history
• India Post — Public Provident Fund Scheme 2019
• DICGC — Deposit insurance FAQs
• National Savings Institute — Sukanya Samriddhi Account
• National Savings Institute — Post Office Recurring Deposit
• Income Tax Department — e-filing portal

By the OnlineCalculator.pro team. Checked against the sources above on 15 October 2026.

For education only. This is not investment advice, and we are not SEBI-registered advisers. Returns are assumptions, not predictions.