A complete comparison of Public Provident Fund (PPF) and Fixed Deposit (FD) covering interest rates, tax benefits, liquidity, safety, and suitability for financial goals.
Last Updated: 31 Jan 2026
Source: Reserve Bank of India
Updated Quarterly
Best For
Retirement savings, tax planning, long-term wealth
Interest Rate (Current)
7.1% p.a. (Tax-Free)
Effective Rate (30% tax bracket)
~10.14% p.a.
Lock-in Period
15 years (partial withdrawal after 7 years)
Tax Benefit
EEE Status (Triple Tax Exemption)
Best For
Emergency fund, short-term goals, liquidity needs
Interest Rate (Current)
6.0% - 7.5% p.a. (Taxable)
Effective Rate (30% tax bracket)
~4.2% - 5.25% p.a.
Lock-in Period
7 days - 10 years (flexible)
Tax Benefit
Only Tax Saver FD (5yr) - Section 80C
| Parameter | PPF | FD |
|---|---|---|
| Interest Rate | 7.1% p.a. (Govt. reviewed quarterly) | 6-7.5% p.a. (bank-specific) |
| Tax on Interest | ā Tax-Free (EEE) | ā Fully Taxable as per slab |
| Investment Deduction | ā Up to ā¹1.5L under 80C | Only Tax Saver FD (5yr lock-in) |
| Maturity Tax | ā Tax-Free | ā Interest component taxed |
| Min Investment | ā¹500 (ā¹500 per year min) | ā¹1,000 - ā¹10,000 |
| Max Investment (per FY) | ā¹1,50,000 | No limit |
| Tenure | 15 years (extendable 5yr blocks) | 7 days - 10 years (flexible) |
| Premature Withdrawal | Allowed after 7 years (conditions) | Anytime (0.5-1% penalty) |
| Loan Against Deposit | ā Years 3-6 (max 25% balance) | ā Up to 90% of FD value |
| Safety | Govt of India guarantee | DICGC insured (ā¹5L per bank) |
| Inflation Beating | ā Tax-free returns beat inflation | ā Post-tax barely matches inflation |
| Nomination | ā Allowed | ā Allowed |
| TDS Applicable | ā No TDS | ā If interest >ā¹40K (>ā¹50K seniors) |
| Best For Goal | Retirement, children education (long-term) | Emergency fund, short-term goals |
Smart Strategy: Use Both!
PPF: Invest ā¹1.5L/year for retirement (15-30 years). FD: Park emergency fund (3-6 months expenses) in 1-year rolling FDs. This gives you tax efficiency + liquidity + long-term wealth creation.
Total Investment: ā¹22,50,000
Interest Earned: ā¹18,18,209 (Tax-Free)
Maturity: ā¹40,68,209
Tax Saved (80C): ā¹6,75,000 (lifetime)*
Effective Gain: ā¹24,93,209
*Assuming 30% tax bracket, ā¹1.5L investment/year
Total Investment: ā¹22,50,000
Interest Earned: ā¹16,91,223
Tax on Interest (30%): -ā¹5,07,367
Maturity: ā¹34,33,856
Tax Saved (80C): ā¹0 (Regular FD)
Effective Gain: ā¹11,83,856
*Post-tax returns in 30% bracket
PPF creates ā¹6,34,353 more wealth (ā¹13,09,353 including 80C tax savings)!
After 15-year maturity, you have 3 options:
Take entire corpus, close account. Best if you need lump sum for retirement income or immediate goal.
Let corpus grow with interest (7.1% tax-free). Withdraw partial amounts as needed. Unlimited extensions in 5-year blocks.
Continue investing up to ā¹1.5L/year, earn tax-free interest. No 80C benefit on new contributions. Best for continued growth.
Effective returns after tax for ā¹1 lakh investment in 1 year:
Higher your tax bracket, greater the PPF advantage. In 30% bracket, PPF effectively gives 45% more returns than FD!
See exactly how much your PPF account will grow with annual contributions and tax-free compound interest.
Use PPF CalculatorCalculate FD maturity amounts with various tenures, interest rates, and compounding frequencies.
Use FD Calculator