Fixed Deposits Vs PPF: Which Is Better?

Fixed Deposits Vs PPF: Which Is Better?
Fixed Deposits Vs PPF: Which Is Better?

When an investor wants to invest their money, security for the money is the primary concern they will have. The two most secured investment options available for the Indian investors are Public Provident Fund and Fixed Deposit. Both the investment options are suitable when you are an investor who has low-risk tolerance. 

When you want to choose between these two investments, then you should first understand well about both. This article will help you get a better understanding of both the investment types before making your final choice:

What Is A Fixed Deposit?

A fixed deposit is a financial investment option offered by both banks and NBFCs to their customers. The interest rates for fixed deposit investments are higher than that of a standard savings bank account. A fixed deposit is an investment where you will invest a lump sum together for a fixed tenure and interest rate.

The interest rate for a fixed deposit will vary depending upon the tenure you choose and the amount you invest. A fixed deposit is of two types: cumulative and non-cumulative fixed deposit. A cumulative fixed deposit is an investment where you will get both the money you invest and the interest it gains at maturity.

Whereas when you opt for a non-cumulative fixed deposit. You will have an option to choose the interest payout schedule depending upon your financial requirement. The interest payout schedule can be monthly, bi-monthly, quarterly, half-yearly or annually. 

The fixed deposit tenure ranges from seven days to ten years, and you can choose it depending on your financial requirement. Currently, the fixed deposit interest rate ranges from 6.5% to 9.8%, depending on the financial provider and tenure you choose. You can also invest in the five-year tax-saving fixed deposit when you want to get a tax exemption. 

Who Should Invest In Fixed Deposits?

When you are an investor who is looking for risk-free investment instruments, then a fixed deposit is the best option for you. Fixed deposit investment offers guaranteed returns as they don’t depend on the market changes, so it the safest investment option. 

Though there are many market-linked investment options available that will offer higher returns, they will have a higher risk. But when you want to balance your investment portfolio according to your risk appetite, then choosing to invest in a fixed deposit will be the best choice for you. All you have to do is choose a credible financial provider to get your fixed deposit investment for getting better results.

What Is A Public Provident Fund?

The Public Provident Fund PPF is an investment cum tax saving financial instrument that will help investors in need. PPF is a savings scheme offered by the Indian government launched by the National Savings Institute in 1968. As it is a government offered scheme, so it is secured and offers guaranteed returns. You can get a PPF account in any nationalized banks, post office, or private banks. 

The government decides the rate of interest you gain and will decide it every quarter. You will get your interest for your deposit amount on 31st March each year. The tenure for a PPF account is 15 years, and you can extend it for another five years. You can attain a tax exemption of up to Rs.1.5 lakhs for your investment with a PPF account.

Who Must Invest In A Public Provident Fund?

When you are an individual who wants to invest for a guaranteed return over a more extended period, then a PPF investment is the best choice for you. A PPF account has a hold-on period of fifteen years. But you can get some returns when your PPF account attains seven years.  

When you want to meet your long term financial goals like your child’s higher education, marriage, buying your dream home, then you can choose a PPF account. A PPF account is an investment product that will provide a guaranteed return for your investment amount over a longer tenure. 

Difference Between Fixed Deposit & PPF. Which is Better?

Both fixed deposit and PPF offers guaranteed returns in the form of interest towards the invested amount. However, in both schemes, the investment tenure varies. Investors can choose the investment tenure based on their financial objectives. You can also attain various tax benefits on both investment options. Here are the standard differences between PPF and FD:

ParametersPublic Provident FundFixed Deposit
IssuerThe Indian Post Office and some authorized banksBanks and NBFCs
Eligibility CriteriaIndian residentIndian resident, HUFs, Trust, Corporation Firms, and even NRIs
Joint AccountNot availableAvailable
Investment TenureLock-in period of 15 years which you can increase by five yearsSeven days to ten years
Minimum Deposit AmountRs.50 per financial yearChanges according to the financial provider
Maximum Deposit AmountRs.1,50,000 per financial yearNo maximum limit
Premature WithdrawalAllowed after seven years from the start of your investmentAvailable anytime with a penalty
Interest Payout31st March of each financial yearCan be monthly, bi-monthly, quarterly, half-yearly or annually as per your need
Interest Rate ChangesGovernment announces each quarterNo pattern followed
Loan Against DepositLoan available after three years of the start of your investment Available
Taxation On Your Interest Income Rs.1.5 lakhsRs.1.5 lakhs
Taxation On Your Deposit AmountQualifies for tax exemptionDoesn’t qualify; only the interest qualifies

How Is Interest Rate For FD And PPF Gets Calculated?

When you consider a PPF account, the Ministry of Finance will decide each quarter. The current interest rate for a PPF account is 7.1%. You will get the interest payment for a PPF account on 31st March of each financial year. The interest on your PPF account gets calculated by the minimum balance in an investor account on each month 5th.

The interest rate for your fixed deposit account will get predetermined when you start your investment. The interest rate remains the same all over the tenure, and it stays the same as when you open your fixed deposit. Also, depending upon the interest payout, fixed deposit is of two types: cumulative and non-cumulative fixed deposit. 

However, you can calculate the estimated maturity amount for a fixed deposit investment with an FD calculator. The same goes for calculating the maturity amount for your PPF account, and you can use the PPF calculator. You can use the online calculators multiple times for deciding upon one investment that will best suit you. 


When you make your investment with a fixed deposit or PPF account, you can be sure that your hard-earned money doesn’t go in vain. Also, you should invest your money in some financial instruments for it to grow rather than having it idle in your account. When you want to maximize your tax benefits, you should invest in these two investment options. When you want to avail flexible tenure options, then you should invest in a fixed deposit investment. Both investments have different qualities. So you should choose the right one that best suits your financial goals when you want your investment to be successful. You should make sure to maintain a suitable investment portfolio depending upon your requirements.