PPF vs FD vs RD — where should Indians park their savings?

Quick answer: PPF wins for long-term tax-free safe wealth (7.1% net, EEE, 15 years). FD wins for short-to-medium safe parking (6.5-7.5% gross, slab-taxed, 7 days to 10 years). RD wins when you can save monthly but don't have a lump sum. None of them beat equity SIPs over 10+ years — use them for the safe, short-term portion of your portfolio.

Side-by-side

Feature	PPF	FD	RD
Current rate	7.1% (Q1 FY 2025-26)	6.5–7.5%	6.5–7.5%
Lock-in	15 years	Tenure-locked	Tenure-locked
Tax on interest	Tax-free	Slab-rate	Slab-rate
Compounding	Annual	Quarterly	Quarterly
Min deposit	₹500/yr	₹1,000+	₹100/mo
Max deposit	₹1.5L/yr	Bank-set	Bank-set
Risk	Govt-backed (zero)	DICGC ₹5L cover	DICGC ₹5L cover

When to use each

PPF — for long-term tax-free corpus. Goals 15+ years away. Use the PPF Calculator to project maturity. ₹50,000/year for 15 years grows to ~₹13.5 lakh tax-free.

FD — for capital you'll need within 1-3 years. Down-payment savings, kids' fee deposits, top-up emergency fund. The FD Calculator shows post-TDS payout. Senior citizens get 0.5% extra and a higher TDS exemption (₹50k vs ₹40k).

RD — for monthly discipline. When you can save ₹2-5k a month but can't commit a lump sum. Use the RD Calculator — same rate as FD, lower effective return because early instalments earn interest for less time.

Common mistakes

1. Putting emergency fund into PPF — it's locked for 15 years.
2. Choosing FD over equity for retirement — ₹10k/month FD over 20 years gives ~₹52L; equity SIP gives ~₹1Cr.
3. Tax-saver FDs vs ELSS — both are 80C-eligible. ELSS has 3-year lock-in, equity returns. Tax-saver FDs are 5-year locked at 6.5-7% taxable. ELSS wins.
4. Comparing PPF and FD by rate alone — PPF's 7.1% is tax-free; FD's 7% is taxable. Post-tax for a 30%-slab earner: PPF 7.1% vs FD 4.9%. Big gap.

FAQ

Q. Is PPF interest taxable? A. No — fully tax-free. Both annual interest and the maturity amount.

Q. Can I have multiple PPF accounts? A. No, only one per individual. Combined deposits across all your accounts can't exceed ₹1.5L per FY.

Q. Are FD interest rates fixed for the entire tenure? A. Yes — once you book at 7.25%, that rate locks for the full tenure regardless of future rate changes.

Q. What's a “tax-saver FD”? A. A 5-year FD that qualifies for 80C deduction up to ₹1.5L. Locked for 5 years (no premature withdrawal). Interest still taxable.

Q. Can I increase my PPF deposit mid-year? A. Yes, up to 12 deposits per year, totalling ≤ ₹1.5L. Make them before the 5th of each month to maximise interest.