Last updated: 15 October 2026
Ask any Indian parent where to keep money safely, and you'll hear one of two answers: "FD karwa do" or "PPF khol lo." Both sound safe, both sound sensible, and both have been around longer than most of us. But they're built for very different jobs. One is a flexible parking spot. The other is a slow, steady, tax-free savings machine that doesn't like being disturbed.
Let's put them side by side so you can pick the right one, or, more likely, use both properly.
What is a PPF?
PPF stands for Public Provident Fund. It's a long-term savings scheme run by the Government of India. You can open one at a post office or at most big banks.
The basics, under the PPF Scheme, 2019:
- You can deposit anywhere from ₹500 to ₹1.5 lakh in a financial year.
- The account runs for 15 years, counted from the end of the financial year in which you open it. After that, you can extend it in 5-year blocks.
- The interest rate is set by the government every quarter. For 1 October to 31 December 2026, it is 7.1% a year (as of 15 Oct 2026), compounded yearly. It has stayed at 7.1% for a long time, but it can change in any quarter.
Think of PPF as a piggy bank with a government-backed lock. You can keep feeding it, it keeps growing, and breaking it early is hard on purpose.
What is an FD?
An FD, or fixed deposit, is the simplest thing a bank sells. You give the bank a lump sum for a fixed time, from 7 days to 10 years, and it pays you a fixed rate.
To give you a feel for current numbers, here are SBI's rates for regular deposits below ₹3 crore (card effective from 15 December 2025, still listed when we checked on 15 October 2026):
| SBI FD tenure | Regular rate | Senior citizen rate |
|---|---|---|
| 1 year to less than 2 years | 6.25% | 6.75% |
| 2 years to less than 3 years | 6.40% | 6.90% |
| 3 years to less than 5 years | 6.30% | 6.80% |
| 5 years to 10 years | 6.05% | 7.05%* |
\*Includes SBI's extra 0.50% for seniors under its "WeCare" scheme.
Other banks pay a bit more or less, and small finance banks often pay more. One thing to watch: the RBI raised the repo rate by 0.25% to 5.50% on 7 October 2026. When RBI raises rates, banks often raise FD rates over the following weeks, so check your bank's latest card before you book.
As of 15 Oct 2026, though, SBI hadn't revised its FD card yet; it still shows the rates effective from 15 December 2025. And remember, FDs with NBFCs aren't covered by DICGC insurance at all, so that ₹5 lakh safety net only applies to bank deposits.
Your FD rate is locked in on the day you open it. If you book a 3-year FD at 6.30%, you get 6.30% for all three years, even if rates move later.
PPF vs FD: The quick comparison
| PPF | Bank FD | |
|---|---|---|
| Who runs it | Government of India | Your bank |
| Current rate (as of 15 Oct 2026) | 7.1% (Oct–Dec 2026) | About 6% to 6.5% at big banks for 1 to 5 years |
| Rate fixed for full term? | No, reviewed every quarter | Yes, locked at booking |
| Lock-in | 15 years (partial withdrawal from year 7) | You choose, 7 days to 10 years |
| Breaking early | Very limited | Allowed, with a small penalty |
| Tax on interest | Tax-free | Taxed at your slab rate |
| Tax deduction on deposit | Yes, up to ₹1.5 lakh (old regime only) | Only the 5-year tax-saver FD (old regime only) |
| Safety | Backed by the government | Insured up to ₹5 lakh per bank by DICGC |
| Deposit limit | ₹1.5 lakh a year | No upper limit |
The big difference: tax
This is where PPF quietly wins for most people.
PPF interest is tax-free. So is the money you get at maturity. Under the new Income-tax Act, 2025, it is listed as exempt income in Schedule II (this replaced the old Section 10(11)). And if you're in the old tax regime, your PPF deposit also counts for the ₹1.5 lakh deduction under Section 123 (the old Section 80C).
FD interest is fully taxable. It gets added to your income and taxed at your slab rate, every year, whether you withdraw it or not. Your bank also deducts TDS, usually 10% if you've shared your PAN, once your FD interest at that bank crosses ₹50,000 in a year (₹1 lakh for senior citizens). That rule now sits in Section 393 of the new Act (the old Section 194A).
So what does a 6.25% FD really give you after tax?
| Your tax slab | 6.25% FD after tax (including 4% cess) | PPF |
|---|---|---|
| No tax | 6.25% | 7.1% |
| 20% slab | About 4.95% | 7.1% |
| 30% slab | About 4.30% | 7.1% |
Surcharge ignored. This is a simple estimate to show the gap, not exact tax advice.
Fintelligent
If you're in the 30% slab, that "6.25%" FD is closer to a 4.3% FD once the taxman takes his share. It's like ordering a ₹100 thali and finding out the GST, service charge and "chutney fee" are paid out of your plate.
A simple ₹ example
Say you put ₹1 lakh every year for 15 years, so ₹15 lakh in total.
- In PPF, assuming the rate stays at 7.1% for all 15 years and you deposit early each year, you'd have about ₹27.1 lakh, all tax-free.
- In FDs, renewed every year at an assumed 6.25%, you'd have about ₹25.2 lakh before tax. After tax, that drops to about ₹22.6 lakh in the 20% slab and about ₹21.4 lakh in the 30% slab.
These are illustrations, not promises. The PPF rate can change every quarter, FD rates change all the time, and the FD figures assume tax is paid each year out of the interest.
That's a gap of roughly ₹4.5 to ₹5.7 lakh for a taxpayer, just from picking the right box for long-term money.
Fintelligent
The big catch with PPF: your money is stuck
PPF's tax-free magic comes with a long lock. Here's what you can and can't do:
- Years 1 and 2: No withdrawals, no loans.
- From year 3 to year 6: You can take a loan of up to 25% of the balance from two years earlier.
- From year 7: You can make one partial withdrawal a year, capped at 50% of a set earlier balance.
- Closing it early is allowed only after 5 years, and only for specific reasons like serious illness or higher education, with a small interest cut.
So PPF is terrible for money you might need next year. An FD, on the other hand, can be broken almost any time. SBI, for example, pays 0.50% less than the rate for the period you actually held the FD (deposits up to ₹5 lakh).
How safe are they?
Both are about as safe as it gets in India, but in slightly different ways.
- PPF is backed by the Government of India. There is no realistic chance of losing your deposit.
- Bank FDs are protected by DICGC (a subsidiary of RBI) for up to ₹5 lakh per depositor, per bank, covering principal and interest together. If you have more than ₹5 lakh, splitting it across banks keeps more of it covered.
So which one should you choose?
You don't have to pick a winner. They do different jobs.
Pick FD for:
- your emergency fund, or at least part of it,
- money you'll need in the next 1 to 5 years, like a wedding, a bike, or next year's fees, and
- when you want a rate locked in today, especially if rates are rising.
Pick PPF for:
- long-term goals 15 or more years away, like retirement or a child's education,
- steady, tax-free growth with zero market risk, and
- when you're in a higher tax slab and want to cut the tax drag on your safe money.
A sensible setup for many people is: emergency money in FDs or a sweep-in savings account, long-term safe money in PPF, and some growth money in equity through a SIP.
A few practical tips
- Deposit in PPF before the 5th of the month. PPF interest for each month is worked out on the lowest balance between the 5th and the end of the month. A deposit on 4 April earns for April; one on 6 April doesn't. For a lump sum, 1 to 5 April is the sweet spot.
- Keep your PPF alive. Put in at least ₹500 every financial year, or the account becomes inactive and you pay a small penalty to revive it.
- Ladder your FDs. Instead of one big FD, split it into 1, 2 and 3-year FDs. Some money unlocks every year, and you catch new rates as they come.
- Submit Form 121 if the tax on your estimated total income for the year will be nil. That's the new form that replaced Form 15G/15H, so your bank doesn't deduct TDS unnecessarily.
- Don't forget the ₹1.5 lakh is shared. If your EPF, insurance premiums and ELSS already use up the Section 123 limit, extra PPF won't save more tax, though the interest is still tax-free.
The bottom line
FD is your flexible, short-term friend. PPF is your patient, long-term, tax-free one. If you need the money soon, use an FD. If you won't touch it for 15 years and you pay tax, PPF usually leaves you with noticeably more. Most families do best with a bit of both, each doing its own job.
Related reads
Sources (checked 15 October 2026): Ministry of Finance, Department of Economic Affairs, Small Savings interest rates (Office Memorandum dated 30 September 2026: PPF 7.1% for 1 October to 31 December 2026, unchanged from the previous quarter); National Savings Institute, Public Provident Fund Account and PPF Scheme rules (₹500 to ₹1.5 lakh a year, 15-year term, loan from year 3, partial withdrawal from year 7); State Bank of India, Retail domestic term deposit rates (rates effective 15 December 2025, still the current card on 15 October 2026) and Deposit rates and premature withdrawal penalty (0.50% below the rate for the period held, deposits up to ₹5 lakh); Reserve Bank of India, Monetary Policy Committee resolution, 5 to 7 October 2026 (repo rate raised to 5.50%); DICGC, A Guide to Deposit Insurance (₹5 lakh per depositor per bank, principal plus interest; deposits mobilised by NBFCs not covered); Income Tax Department, Section 393, Income-tax Act, 2025 (TDS on bank interest above ₹50,000, or ₹1 lakh for senior citizens, at "rates in force"), TDS Rates (10% on interest other than interest on securities), and Form No. 121 (replaced Forms 15G and 15H; for those whose tax on estimated total income will be nil) and Exempt income; Income Tax Department, Schedule XV, Income-tax Act, 2025 (investments eligible for the Section 123 deduction). Example returns are illustrations based on stated assumptions, not guarantees; after-tax figures include 4% cess and ignore surcharge.
