PPF vs Fixed Deposit (FD): Which is Better for You?

When it comes to long-term savings and investments, two popular options in India are the Public Provident Fund (PPF) and Fixed Deposits (FD). Both have their advantages and disadvantages, depending on your financial goals, risk appetite, and tax planning needs. Let’s compare these two investment options to help you make an informed decision.

Key Differences Between PPF and FD

Here’s a detailed comparison of PPF and FD based on various factors:

Factor	PPF	FD
Returns	7.1% (as of 2024, compounded annually)	6%–8% (varies by bank and tenure)
Tax Benefits	Tax-free maturity under Section 80C	Taxable interest unless invested in Tax-Saver FDs
Liquidity	Partial withdrawals allowed after 7 years	Premature withdrawal possible but with penalties
Lock-in Period	15 years (extendable in blocks of 5 years)	Varies (typically 1–10 years)
Risk	Government-backed, zero risk	Bank-backed, minimal risk
Investment Limit	₹500–₹1.5 lakh per year	No upper limit

Why Choose PPF?

PPF is an excellent choice if:

You’re looking for a long-term, tax-free investment.
You want to maximize tax savings under Section 80C.
You prefer a government-backed, risk-free investment.
You’re planning for retirement or other long-term goals.

Why Choose FD?

FD is a better option if:

You need flexibility in investment tenure and amount.
You’re looking for moderate returns with minimal risk.
You want access to your funds before the lock-in period ends.
You’re not eligible for tax-saving investments like PPF.

Which Should You Choose?

The choice between PPF and FD depends on your financial goals and priorities:

If you’re focused on long-term wealth creation and tax benefits, PPF is the better option.
If you need short-term savings with moderate returns and liquidity, FD may suit you better.

Use our PPF Calculator to estimate your PPF returns and plan your investments effectively. For FD calculations, consider using a reliable FD calculator to compare returns.