Fixed deposit vs Public Provident Fund

Know all about fixed deposit and public provident fund.
4 mins
01 Feb 2023

Money plays the starring role in all of our daily activities, and everything we do in life is either directly or indirectly related to the act of earning, saving, or spending money. Therefore, we invest a lot of effort into earning money in order to live a respectable life. However, the problem about money is that it always seems to elude us when we most need it. A sound savings strategy can give us some peace of mind by making us feel like there is a backup in the event of a financial emergency but selecting the correct backup can be challenging. Fixed Deposits (FDs) and Public Provident Fund (PPF) are two extremely popular investment options, each vying to attract investors with a slew of benefits and features. Both schemes come with minimal risks. The process to open an FD account or a PPF account is simple.

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 interest rate on an FD 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.

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

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

Interest rate

Up to 8.50% 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

What is Provident Fund?

Provident Funds are government-sponsored retirement planning programmes that give people the chance to invest in several Provident Fund types. In India, the Employee Provident Fund (EPF) and Voluntary Provident Fund (VPF) are the two most common ways to invest in Provident Funds.
A Provident Fund (PF) is a retirement savings plan offered by many employers. Employees contribute a portion of their salary to the fund, and the employer may also make contributions. The funds in a PF are typically invested in a diversified portfolio of assets, such as stocks and bonds, and the returns on these investments are used to pay benefits to employees when they retire.

How is interest calculated in FD and PF?

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 interest is compounded annually and credited to the PPF account at the end of the financial year.

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 (FD) 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.

Comparison between PPF and fixed deposit

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


Fixed Deposit

Provident Fund

Investment type



Tax benefits

Tax benefits under Section 80C for contributions and Section 80TTA for interest earned

Tax benefits under Section 80C for contributions and Section 80C for maturity amount





Fixed returns, generally higher than savings account interest rates

Market-linked returns, can be higher or lower than fixed deposit returns


Withdrawals before maturity may result in a penalty

Withdrawals before retirement may be restricted or subject to penalty


Available to all individuals and organisations

Available to salaried employees and certain organisations

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.