Both PPF and FD are safe, government-backed savings instruments. But they differ significantly in tax treatment, liquidity, and returns.

PPF at a Glance

• Rate: 7.1% p.a. (Government declared, revised quarterly)
• Lock-in: 15 years (partial withdrawal from Year 7)
• Tax: EEE — contribution, interest, and maturity are all tax-free
• Max deposit: ₹1.5 lakh per year

FD at a Glance

• Rate: 6.5%–8.5% p.a. depending on bank and tenure
• Lock-in: Flexible — 7 days to 10 years
• Tax: Interest is fully taxable as per slab; TDS applies above ₹40,000/yr
• No deposit limit

Return Comparison (₹1.5L/year, 15 years)

For taxpayers in the 30% slab, PPF wins even at a lower nominal rate because of the tax exemption.

When to Choose PPF

• You are in the 20%+ tax slab
• You want a guaranteed, zero-tax, long-term savings vehicle
• You can lock money away for 15 years
• You want to build a retirement corpus

When to Choose FD

• You need liquidity — FDs can be broken (with a small penalty)
• You are in the 0% or 5% tax slab (tax advantage minimal)
• You want a shorter tenure (3–5 years)
• You need amounts beyond ₹1.5L/year

Verdict

PPF is almost always better for salaried employees in the 20–30% tax bracket who can commit for 15 years. FD wins on flexibility and for those who need to deploy large sums or want shorter tenures.

Use our FD Calculator to model your FD scenario, and watch for our upcoming PPF Calculator.