Key Takeaways
- PPF rates are government-set; FD rates are bank-set.
- PPF compounds annually; FDs often compound quarterly.
- FDs offer flexible terms; PPF has a long fixed tenure.
- Verify current PPF rules and FD rates before deciding.
On this page
Two stability-focused choices
If you want predictability rather than market exposure, both PPF and fixed deposits fit. The differences lie in who sets the rate, how often interest compounds, and how liquid the money is.
Comparison
| Factor | PPF | Fixed Deposit |
|---|---|---|
| Rate set by | Government (statutory) | The bank |
| Compounding | Annual | Often quarterly |
| Term | Long, fixed | Flexible |
| Liquidity | Restricted | Higher (with penalty) |
Illustration: ₹1.5 lakh a year for 15 years
Assume ₹1,50,000 deposited at the start of every year and an illustrative PPF rate of 7.1% held constant. The PPF balance after 15 years is about ₹40.7 lakh on ₹22.5 lakh of deposits — roughly ₹18.2 lakh of interest, all of it compounding tax-free under the scheme's current treatment (verify at the time you invest).
An FD cannot be compared one-to-one because banks rarely offer 15-year terms. A saver would instead run a chain of shorter deposits: ₹10 lakh placed in a 5-year FD at an assumed 7% compounded quarterly grows to about ₹14.15 lakh, but the ₹4.15 lakh of interest is added to taxable income each year it accrues, so the after-tax figure is lower for anyone above the basic exemption limit. Reinvesting at maturity also means accepting whatever rate the bank offers then.
Which fits which goal
- Money you will not need for 15 years (a child's higher education, retirement top-up): PPF's lock-in is a feature, not a bug — it removes the temptation to break the deposit.
- Money you may need in 1–5 years (a car, a wedding, an emergency buffer): an FD, or a ladder of FDs maturing in different years, keeps the money reachable with only a premature-withdrawal penalty.
- Tax position matters: for a depositor in a high slab, PPF's exempt interest can beat a nominally higher FD rate; for someone below the taxable threshold the FD's flexibility may be worth more. Work your own numbers with both calculators.
Common mistakes
- Comparing the headline PPF rate with an FD rate without adjusting the FD for tax.
- Assuming today's PPF rate will hold for 15 years — it is reset every quarter.
- Depositing into PPF after the 5th of the month and losing that month's interest, since interest is computed on the lowest balance between the 5th and month-end.
Check current figures
PPF rates and rules are statutory and change; FD rates vary by bank and over time. We do not hardcode either. Confirm current numbers with primary sources, then compare illustrative outcomes with the PPF calculator and FD calculator.
Sources
We reference primary and official sources. Rate- and rule-dependent details must be verified against the latest official information.
Related Calculators
Related Guides
FD vs PPF: A Practical Comparison
An FD is a flexible bank deposit for any term; PPF is a long-tenure government savings scheme with annual compounding. They serve different horizons and purposes.
bankingWhat Is a Fixed Deposit?
A fixed deposit is a deposit placed with a bank for a fixed term at an interest rate agreed at the time of booking, offering predictable returns and high capital stability.
retirementWhat Is the Public Provident Fund (PPF)?
PPF is a long-term, government-backed savings scheme where you contribute each year and earn annually compounded interest at a rate set by the government. Its rules are statutory and change over time.