Last Updated:July 06, 2025, 09:00 IST
Both Fixed Deposits and Public Provident Fund are considered safe options for long-term investors, but they vary in structure, returns and tenures.
FDs come with various investment tenures ranging from one year to 10 years. (Representative Image)
Fixed Deposits (FD) and Public Provident Fund (PPF) are both considered secure investment options for long-term investors who seek stable returns with almost no risk.
While the PPF assures tax benefits and long-term returns, the FDs come with flexibility and better liquidity. Both could be suitable for risk-averse investors. Though both FDs and PPF are aimed at providing secured returns to investors, they differ in structure, interest rates and tenure.
Before choosing between any of these savings instruments, it’s important to evaluate which could be the most suitable for your financial goals.
Let’s check key differences between FDs and PPF:
Tax Benefits
A major factor to consider before choosing between Fixed Deposits and Public Provident Fund could be the tax benefits. While PPF investments are eligible for tax benefits under Section 80C of the Income Tax Act, 1961, all FDs don’t qualify for tax exemption. A few FD schemes, with a lock-in period of 5 years, are eligible for tax benefits.
The investors can claim income tax deductions up to Rs 1.5 lakh in a financial year under Section 80C against the investments in the PPF and tax-saving FDs.
The PPF scheme falls under the exempt-exempt-exempt (EEE) status for income tax purposes. Apart from the investments, the interest earnings and the maturity amount are tax-free. On the other hand, the FD maturity amounts may attract capital gains tax.
Interest Rates
The PPF interest rate is fixed by the government for each quarter. Currently, the PPF interest rate stands at 7.1% per annum (for the July to September quarter of FY26). The interest rate is compounded annually and credited to the account on March 31 each year. In contrast, the interest rates on Fixed Deposits are determined by banks and vary based on tenure and market conditions. Currently, most banks are offering interest rates of 5% to 8% per annum for FDs of various tenures.
Lock-In Period
With Fixed Deposits, the lock-in period can range from 7 days to 10 years. It’s a flexible feature that allows investors to choose a term that aligns best with their financial needs. It’s important to note that pre-mature liquidation of an FD could lead to penalties and loss of money.
On the other hand, the PPF scheme has a fixed investment period of 15 years, which can be extended in blocks of 5 years each. Partial withdrawals are allowed during this tenure under certain circumstances.
PPF vs FD: What To Choose
Investment in FDs requires individuals to invest a lump sum amount. No periodic investments are allowed when you open an FD account. The minimum investment sum varies for Fixed Deposits depending on the bank, but typically, individuals can start with Rs 1,000.
On the other hand, the PPF scheme allows investing small amounts for 15 years. You can invest at least Rs 500 in a financial year to keep the account active. The investment amount has been capped at Rs 1.5 lakh in a financial year.
Choosing between the two should depend on the investment horizon and financial needs. If you are looking for a fixed return over a pre-defined period at a pre-decided rate, FDs could be suitable. In terms of flexibility and long-term horizon, the PPF scheme could be a better choice.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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