PPF vs FD — the safer rupee, with math

Both are 'safe' rupee instruments, but they behave very differently once tax and lock-in enter the picture. The headline interest rate is the wrong thing to compare — the post-tax return is what reaches your pocket.

Public Provident Fund (PPF)

Government-backed, 15-year term, rate reset quarterly (around 7.1%).
EEE tax status: the deposit qualifies for 80C (section 123 of the new Income-tax Act, 2025), and both the interest and the maturity amount are completely tax-free.
Limit of ₹1.5 lakh per year; partial withdrawals only from year 7.

Fixed Deposit (FD)

Any bank, any tenure from 7 days to 10 years, rate locked at booking.
Interest is fully taxable at your slab rate, with TDS deducted by the bank.
Liquid — you can break it early for a small penalty.

The post-tax math

Take a 7% FD. In the 30% tax bracket, the after-tax return is roughly 7% × (1 − 0.30) ≈ 4.9%. A PPF at 7.1% is tax-free, so it stays 7.1%. For a high earner, PPF quietly beats the FD by over two percentage points a year — and that gap compounds for 15 years.

So which one?

Choose PPF for a long-term, tax-free corpus (retirement, a child's future) if you're in a higher bracket and don't need the money for years. Choose an FD for short-term goals, an emergency buffer, or if you're in a low/zero tax bracket where the taxable interest barely matters — senior citizens also get higher FD rates plus the 80TTB (section 153 of the new Income-tax Act, 2025) exemption.

PPF Calculator FD Calculator

Frequently asked questions

Is PPF better than an FD?: For a higher earner, usually yes. PPF is tax-free (EEE) at around 7.1%, while FD interest is taxed at your slab — a 7% FD nets only about 4.9% after 30% tax. PPF quietly beats it by over two points a year, and that gap compounds for 15 years.
Is PPF interest tax-free?: Yes. PPF has EEE status: the deposit qualifies for Section 80C, and both the interest and the maturity amount are completely tax-free. FD interest, by contrast, is fully taxable at your slab rate with TDS deducted.
When should I pick an FD over PPF?: Choose an FD for short-term goals, an emergency buffer, or if you're in a low or zero tax bracket where the taxable interest barely matters. PPF suits a long-term, tax-free corpus you won't touch for years.

Educational content, not financial advice. Figures are illustrative and based on the rules current at the time of writing; verify specifics with a qualified advisor.