PPF vs FD: Which Is Better for Long-Term Savings in India?

When you’re saving for the long haul in India, two names keep popping up: Public Provident Fund, a government-backed, tax-advantaged savings scheme designed for retirement and long-term wealth. Also known as PPF account, it’s one of the most trusted tools for building tax-free wealth over 15 years. And then there’s Fixed Deposit, a simple, low-risk savings product offered by banks and post offices where you lock in a lump sum for a fixed period to earn interest. Also known as FD, it’s the go-to for people who want predictable returns without the long wait. Both are safe, both earn interest, but that’s where the similarities end.

PPF gives you tax breaks at every stage—your contributions are deductible under Section 80C, the interest grows tax-free, and even the maturity amount is completely tax-free. FDs? Only the principal amount qualifies for a tax deduction under 80C if it’s a 5-year tax-saving FD. The interest you earn on regular FDs? Fully taxable every year, even if you don’t withdraw it. That’s a huge difference over 10 or 15 years. Plus, PPF has a fixed interest rate set by the government every quarter, which is usually higher than most bank FD rates. Right now, PPF is offering around 7.1%, while top FDs hover between 6.5% and 7%. Not a huge gap, but when you compound that over 15 years with tax-free growth, PPF pulls ahead.

But here’s the catch: PPF locks your money for 15 years. You can’t touch it without penalties until then. FDs? You can pick the term—7 days, 1 year, 5 years. Some banks even let you break your FD early with a small penalty. If you need flexibility, FD wins. If you’re building a retirement fund and don’t plan to touch the money, PPF is the smarter play. Also, PPF has a yearly deposit limit of ₹1.5 lakh. FDs? No cap. You can deposit ₹10 lakh in an FD tomorrow if you want. And if you’re an NRI, forget PPF—you can’t open one. But FDs? You can open an NRE or NRO FD and still earn solid returns.

So it’s not about which is ‘better.’ It’s about what you need right now. Are you saving for a goal 15+ years away? PPF gives you safety, tax-free growth, and discipline. Need short-term parking for cash you might need in 2 or 3 years? FD is your friend. And if you’re smart, you use both—put your long-term savings in PPF, and keep your medium-term goals in FDs. This isn’t a choice between two options. It’s about building a smarter savings stack.

Below, you’ll find real, practical breakdowns of how PPF and FDs actually perform in India—what people earn, what they miss, and how to avoid common mistakes that cost thousands in lost interest or tax penalties.