FDs vs PPF: Which Safe Investment Is Better for You?

When it comes to safe and low-risk investment options, Fixed Deposits (FDs) and Public Provident Fund (PPF) are two of the most trusted choices in India. Both offer guaranteed returns and protect your money from market volatility, but they differ in many ways, like interest rates, flexibility, and tax benefits.

Here's a simple breakdown to help you decide what suits you best.

Interest Rates:

Most banks currently offer interest rates ranging from 6% to 7.1% per annum on fixed deposits, revising after the Reserve Bank of India (RBI) reduced the repo rate by 50 basis points during its Monetary Policy Committee meeting held on June 6, 2025.

PPF offers a fixed interest rate of 7.1%. This means that, in terms of returns, PPF is either on par with or slightly better than FDs. However, it's important to note that FD interest rates can vary depending on the tenure you choose, giving investors more options to tailor their returns based on their investment horizon.

Tax Benefits:

"Under the old tax regime, PPF stands out with its triple tax advantage. You can claim a deduction of up to Rs 1.5 lakh per year under Section 80C for your investment in PPF. Moreover, the interest earned and the maturity amount are both completely tax-free, making it a highly tax-efficient option," explains Tax Expert CA Gauri Chadha.

"In comparison, FDs offer limited tax benefits; only 5-year tax-saving FDs qualify for deductions under Section 80C, and even then, the interest earned is fully taxable," added CA Gauri Chadha.

Investment Limits:

PPF allows you to invest a minimum of Rs 500 and up to Rs 1.5 lakh per year, making it ideal for disciplined, small-to-medium savings. In contrast, FDs have no upper investment limit, you can invest any amount from Rs 50,000 to Rs 5 crore or more, which makes them a more suitable option for those looking to invest large sums. FDs are providing more freedom in terms of investment amount.

Lock-in & Liquidity:

PPF comes with a 15-year lock-in period, allowing only limited withdrawals or loans after a few years, which can restrict access to your funds. On the other hand, FDs offer much greater flexibility with tenures ranging from 7 days to 10 years. They also allow premature withdrawal, usually with a small penalty, making them a more practical choice for meeting emergency expenses or short-term financial goals.

Who Should Choose What?

"PPF is best suited for those who are looking for tax-free, long-term returns, especially if they're saving for retirement or other distant financial goals and don't need access to their funds for at least 15 years," says Financial Advisor, Pankaj Mathpal.

"On the other hand, FDs are a better fit for investors seeking higher short-term returns, flexible investment tenures, and quick access to their money," he added.

FDs also offer the option of regular interest payouts, such as monthly or quarterly, making them ideal for those who want a steady income, especially senior citizens who benefit from additional interest perks.
Smart investors use PPF for long-term tax-free savings and FDs for short- to mid-term goals like travel, home repairs, or emergencies. This combo gives you stability, liquidity, and better overall returns.

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