Fixed deposit vs Public Provident Fund

Fixed Deposit and Public Provident Fund are secure investment options offering stable returns, tax benefits, and long-term financial planning advantages.
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FD vs PPF
OPEN FD
4 mins
23-May-2025

Saving money wisely is key to financial peace of mind. When comparing FD vs PPF, both offer low-risk options for steady returns. While Fixed Deposits (FDs) and Public Provident Funds (PPFs) are secure, understanding FD vs PPF helps choose the right backup.

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: Check EPFO Pension Status

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: TDS Rate Chart for FY 2024-25

Comparison between Fixed Deposit and PPF

Below is a comparison of Fixed Deposit and Public Provident Fund based on various parameters.

Factor

Fixed Deposit (FD)

Public Provident Fund (PPF)

Tenure

Flexible terms ranging from 7 days to 10 years, based on your investment goals.

Comes with a lock-in period of 15 years, extendable in blocks of 5 years.

Returns

Interest can be credited periodically or at maturity, as per your choice.

Interest is calculated annually and credited on March 31st each financial year.

Liquidity

Moderately liquid; some FDs allow premature withdrawal with minor penalties.

Low liquidity; partial withdrawals are allowed only from the 7th financial year onward.

Tax Benefits

Eligible for tax deduction up to ₹1.5 lakh under Section 80C.

Offers full tax exemption on both contributions and returns under Section 80C.

Eligibility

Open to residents, NRIs, HUFs, Trusts, and corporate entities.

Restricted to Indian citizens only.

 

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

FD 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.

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