FD vs PPF: Comparison

Fixed Deposit and PPF are reliable savings options in India, offering stable returns, capital protection, and low-risk investment opportunities.
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FD vs PPF
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4 mins
21-July-2025

Choosing the right savings option is essential for financial stability. Both FDs and PPF offer low-risk, reliable returns, but serve different goals. While FDs provide fixed income over short to medium terms, PPF is ideal for long-term, tax-saving investments. Understanding their differences helps make informed financial decisions.

What is fixed deposit?

A fixed deposit (FD) is a type of savings account offered by banks and other financial institutions that typically pay a higher interest rate than a regular savings account. The FD interest rate is fixed for the term of the deposit, which can range from a few months to several years. Depositors are not able to withdraw funds from an FD before the maturity date without incurring a penalty.

Here is a quick look at the features and benefits offered on fixed deposits by Bajaj Finance.

Interest rate

Up to 7.30% p.a.

Minimum tenure

12 months

Maximum tenure

60 months

Deposit amount

Minimum deposit of Rs. 15,000

Application process

End-to-end online process

Online payment options

Net banking and UPI


Also read: Types of Fixed Deposit

What is Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed investment and tax-saving scheme, introduced over 50 years ago by the Ministry of Finance. It remains a preferred choice for risk-averse investors due to its safety and sovereign guarantee.

While it is a flagship offering of the Government of India, many leading banks across the country also provide access to PPF accounts. In some cases, these banks may offer slightly higher interest rates on PPF compared to those offered by India Post.

Fixed Deposit

  1. Trusted by over 5 lakh customers
  2. Fixed Deposits worth more than Rs. 50,000 crore booked
  3. Rated CRISIL AAA/STABLE and [ICRA]AAA(STABLE)
  4. Up to 0.35% p.a. extra interest offered for senior citizens
  5. Flexible interest payout options available - Monthly, Quarterly, Half-yearly, Annually or at Maturity

By proceeding, you agree to our Terms and Conditions

How is interest calculated in FD and PPF?

Interest in a fixed deposit (FD) account is typically calculated on the principal amount and is paid out at a fixed rate, determined by the bank. Interest is usually compounded on a regular basis, such as annually or quarterly.
In Public Provident Fund (PPF) account, interest is calculated annually on the lowest balance between the close of the fifth day and the last day of the month. The interest rate for PPF is determined by the government and is subject to change. The PPF interest rate is compounded annually and credited to the PPF account at the end of the financial year.

You can calculate the interest returns with the help of Bajaj Finance Fixed Deposit Calculator.

Maturity or Lock-in period of PPF and FD

The maturity or lock-in period for a Public Provident Fund (PPF) account is 15 years from the date of opening the account. The account can be extended for blocks of 5 years after the maturity period. The PPF account holder can make a partial withdrawal after 7 years from the date of opening the account.

The maturity or lock-in period for a Fixed Deposit account can vary depending on the bank and the type of FD account. It typically ranges from 7 days to 10 years. Some banks also offer flexible FDs, where the depositor can choose the tenure of the deposit and withdraw the deposit before maturity, although a penalty may be applied.

Also read: PPF Tax Benefits

Benefits of Fixed Deposit vs PPF

Benefits of FD (Fixed Deposit)

  • A safe and secure investment backed by regulated banks and financial institutions.
  • Quick and easy to invest online within minutes.
  • Offers higher interest rates compared to regular savings accounts.
  • Provides fixed returns, unaffected by market volatility.
  • Flexible tenure options based on your financial goals.
  • Option to invest in multiple FDs across different banks.
  • Loans can be availed against the deposit amount.
  • Some banks issue credit cards secured against your FD.
  • Highly liquid – premature withdrawal is allowed (with terms).
  • Eligible for tax benefits under Section 80C with Tax-Saving FDs.
  • Senior citizens enjoy higher interest rates.
  • Allows nomination to ensure the deposit is passed to a beneficiary.

Benefits of PPF (Public Provident Fund)

  • Backed by the Government of India, making it a highly secure option.
  • Offers tax benefits under Section 80C of the Income Tax Act.
  • Interest earned and maturity amount are completely tax-free.
  • Generally provides better returns than many fixed-income instruments
  • Interest rate is fixed quarterly and applies for the entire tenure.
  • Comes with a 15-year lock-in for long-term wealth building.
  • Partial withdrawals are permitted after the 7th financial year.
  • Loan facility available against the PPF balance.
  • Flexible contributions: from Rs. 500 to Rs. 1.5 lakh per year.
  • Market-proof – not linked to market performance or volatility.
  • Ideal for long-term and retirement-focused saving.
  • Promotes disciplined saving habits.
  • Easy transfer of PPF accounts between authorised banks or post offices.

Conclusion

Both fixed deposits and Provident Funds are savings and investment options, but they have different features and benefits. The choice between the two will depend on your personal financial situation and goals. If you are looking for a low-risk investment option with a guaranteed return and a shorter time horizon, a fixed deposit might be a better option. If you are looking for a long-term investment option with the potential for higher returns, a Provident Fund might be a better option.

Calculate your expected investment returns with the help of our investment calculators

Investment Calculator
Fixed Deposit Calculator

Sukanya Samriddhi Yojana Calculator

PPF Calculator

Recurring Deposit Calculator

Provident Fund Calculator

Gratuity Calculator

Frequently asked questions

What is the difference between PPF vs FD interest rate?

The key difference between PPF vs FD interest rates lies in how they are set and paid. PPF interest rates are fixed quarterly by the government and are generally stable. FD interest rates vary by bank and tenure, often offering higher returns based on market conditions.

Is PPF better than FD?

PPF offers investors an interest rate of 7.1%, which is comparable to or even slightly higher than that of FDs in some cases. In contrast, the interest rate on fixed deposits varies depending on the investment tenure.

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