FD vs PPF, since the choice depends on an individual’s specific financial objectives and circumstances. Both FDs and PPFs are savings and investment instruments that offer the potential to earn interest on savings while also providing tax benefits.

FDs are typically offered by banks and other financial institutions, and they provide a fixed interest rate for a pre-determined period. On the other hand, PPFs are government-backed investment schemes that are open to individuals, and they offer a variable interest rate that is set by the Indian government

What is a Fixed Deposit (FD)?

Fixed deposits are savings instruments that are available through banks and Non-Banking Financial Companies (NBFCs). As one of the most secure investment options, the government of India sets the interest rate for FDs. As a result, market fluctuations do not affect the returns earned on fixed deposits.

Benefits Offered by Fixed Deposits

Guaranteed Return- Fixed deposits are a stable investment option that provides a fixed rate of interest over a predetermined period. Unlike other investment avenues, the interest rates applicable to fixed deposits are not influenced by market fluctuations and remain constant throughout the investment period. This results in guaranteed returns on maturity for the investor.

Flexible Tenure- Fixed deposits offer a range of tenures to meet the diverse investment needs of individuals. Investors can choose from both short-term and long-term fixed deposit options, depending on their investment objectives.

Higher Gains- Cumulative fixed deposits offer the benefit of compounding interest on the principal amount, resulting in higher gains over time. The compounding frequency of interest for cumulative fixed deposits may vary, with some institutions offering the option to compound interest on a monthly, quarterly, or half-yearly basis.

Benefits for Senior Citizens- By investing in fixed deposits that offer higher interest rates, senior citizens can earn a steady stream of income and build a corpus for their future needs. The guaranteed returns on fixed deposits also provide a sense of security, ensuring that the investment is safe and will yield predictable returns

Regular Source of Income- Certain fixed deposit schemes provide the option of a monthly payout, which can serve as a reliable and consistent source of income for investors. This type of fixed deposit is known as a Monthly Income Scheme (MIS) or Monthly Interest Plan (MIP).

Under these schemes, the interest earned on the fixed deposit is paid out on a monthly basis, providing investors with a regular stream of income. This can be especially beneficial for retirees or individuals looking to supplement their regular income with a steady source of additional funds

Tax Saving- Tax-saving fixed deposit schemes offer investors an opportunity to lower their income tax liability while earning guaranteed returns. These schemes enable investors to claim a tax exemption on their investment under Section 80C of the Income Tax Act, 1961, up to a maximum limit of Rs. 1,50,000.

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What is a Public Provident Fund (PPF)?

The Public Provident Fund (PPF) is a government-backed investment cum tax-saving instrument that has been in existence since 1968. Introduced by the Ministry of Finance, PPF is widely regarded as a safe and reliable option for long-term investments. Its primary objective was to encourage salaried individuals to save for their future financial needs.

The PPF offers a current interest rate of 7.1%, which is regulated by the government of India every quarter. This provides investors with a profitable return on their investment, while also providing the benefit of tax deductions. Furthermore, PPF investments are exempt from Wealth Tax and are not included in the calculation of taxable income.

Benefits Offered by Public Provident Fund (PPF)

Tenure- “PPF is a long-term investment instrument with a 15-year deposit tenure and a 7-year lock-in period. Extension in blocks of 5 years is available after the completion of 15 years, making it an attractive investment option.”

Investment limit- “PPF account can be initiated with a minimum investment of Rs 500, and the maximum investment limit is capped at Rs. 1,50,000 per financial year, making it accessible to investors with various financial capabilities.”

Tax Saving- The Public Provident Fund (PPF) offers several tax benefits to investors, making it an attractive long-term investment option. The interest earned on the PPF account is eligible for tax deductions under the EEE (exempt, exempt, exempt) format, which means that the interest earned is not taxed. Additionally, contributions made towards the PPF account are also eligible for tax exemption under Section 80C of the Income Tax Act, up to a maximum limit of Rs. 1.5 lakh. Furthermore, withdrawals made from the PPF account are also exempt from wealth tax.

Deposit Frequency- “PPF account holders are required to make a minimum contribution to their account at least once a year for a period of 15 years. Failure to make the minimum contribution during any particular year may lead to account deactivation and may also result in penalty charges upon reactivation.”

Mode of Deposit- Contributions to a PPF account can be made through cheque, online fund transfer, or demand draft

Nomination- it can be stated that an individual has the option to select a beneficiary either during the time of opening a PPF account or at a later stage.

Comparison of Fixed Deposit (FD) and Public Provident Fund (PPF):

  1. Issuing Authority: Banks and NBFCs
  2. Minimum Deposit Amount: Rs. 100- Rs.1000
  3. Liquidity: Moderate Liquidity
  4. Tenure: 7 days- 10 years (20 years in case of some banks)
  5. Eligibility: HUFs, Residents, Corporations, Trusts, Firm, etc. Including NRIs
  6. Joint Account: Allowed
  7. Interest Rate: The interest rate applicable on FDs ranges from 2.90% to 6.5%
  8. Loan Against Deposit: Available
  9. Premature Withdrawals: Allowed for certain FD types
  10. Tax on Interest Earned: Taxable
  11. Tax Benefit on Deposit Made: Only tax saving FD offers tax benefits up to Rs.1.5 lakh U/S 80C of IT Act.


  1. Issuing Authority: Government of India
  2. Minimum Deposit Amount: Rs. 500
  3. Liquidity: Low Liquidity
  4. Tenure: 15 years (can be extended in a block of 5 years)
  5. Eligibility: Indian Residents
  6. Joint Account: Not Allowed
  7. Interest Rate: Currently, the interest rate applicable on PPF accounts is 7.1%
  8. Loan Against Deposit: Available only after the completion of 3 years from the date of initiation
  9. Premature Withdrawals: Allowed after the completion of 5 years of the account from the date of opening the account
  10. Tax on Interest Earned: Fully exempted from income tax
  11. Tax Benefit on Deposit Made: The contribution made towards the PPF account up to a maximum limit of Rs.1.5 lakh is applicable for tax deductions U/S 80C of the IT Act.


In conclusion, both Fixed Deposits (FDs) and Public Provident Fund (PPF) have their own set of advantages and disadvantages. FDs are ideal for those looking for a fixed return with minimal risk, while PPF is a long-term investment option that offers tax benefits, and higher returns, and is suitable for those looking to build a retirement corpus. Ultimately, the choice between FDs and PPF depends on an individual’s financial goals, risk appetite, and investment horizon. It is essential to carefully evaluate these factors and consider other investment options before making a decision. Consult with a financial advisor to understand the best investment options suited for your financial objectives.