Fixed Deposits vs Public Provident Fund: Check interest rates, tenure, tax benefits and risks

Fixed deposits (FDs) and the public provident fund (PPF) are both safe and reliable investment instruments offered by banks in India for conservative investors to earn consistent long-term returns.

Each have their own roles to play in your core investment portfolio, and it is advisable to research and compare both options to your own specific needs before making a choice.

Fixed deposits allow you to allocate a lumpsum amount to a financial institution for a fixed period of time and for a fixed rate of interest. FDs also tend to have higher interest rate than simply parking your money in a savings account.

Meanwhile, launched in 1986 by the government of India, PPF is a savings scheme with generally higher interest rate and tax-exempt interest payout, making it an effective instrument to build wealth over a longer period of time.

When to choose fixed deposit: Goal oriented tool

FDs are great financial tools when saving for specific goals and can be automated so that the deductions from your bank account ensures a neat, fixed amount put aside each month. At the end of tenure, ranging from 7 days to up to 10 years, you can choose to have the principal and interest deposited into your account or renewed as another FD, if the rates are appealing to you.

You can also have separate FDs for children's education, school fees, and big, planned expenditures such as travel and weddings.

Overall, most banks tend to offer a higher interest on the mid to longer term deposits, compared to shorter tenures. Generally, the rates also taper off when it comes to deposits that run longer than three years. Additionally, almost all banks give somewhat higher interest to depositors who are senior citizens (above the age of 60) compared to regular investors.

Across banks, the annual rate of interest this year is between 5.5-7.75%. You can check here for the latest FD interest rates offered by the biggest banks (state and private) in India across tenors — HDFC Bank, State Bank of India (SBI), ICICI Bank, Yes Bank and Kotak Mahindra Bank.

When to choose PPF: Key role in retirement planning

PPF is a government backed savings scheme, with guaranteed tax-exemption on investment, maturity amount and interest earned (aka EEE benefit), at a fixed interest rate of 7.1% this quarter. It is among the safest investment options for retirement and tax planning in India.

A PPF account is offered by any post office or public bank and some private banks in India, for a minimum deposit of ₹100-500 each month. This has KYC requirement where you will need to submit the duly filled form with your Aadhaar Card copy, proof of residence, and a passport size photo.

You can also directly open a PPF account through your bank through online banking or mobile banking.

FD vs PPF comparison chart: Key highlights

(All rates are as mentioned on the respective bank's official website, at time of writing on 10 March 2026)

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.