Fixed deposits and public provident funds could be excellent investment options if you are looking for security and assured returns. You can invest in these tools for the long term and enhance your savings. In addition, they also come with certain tax benefits.


While both offer returns on investment, knowing how they differ could help you choose one that best aligns with your financial goals.

Key Points of Difference Between PPF and FD

The table below shows a comprehensive overview of FD vs PPF:  


Fixed Deposit 

Public Provident Fund 

Issuing Authority

NBFCs and banks

Government of India

Minimum Deposit Amount

Varies among FD issuers 

₹500 per financial year

Maximum Deposit Amount

No limit; Up to ₹1.5 Lakhs for tax-saver FD  

₹1.5 Lakhs per financial year

Investment Tenor or Lock-in

From 7 days to 10 years; Tax-saver FDs have lock-in period of 5 years 

15-year lock-in period 


Moderate; Depends on the FD type 


Loan Against Investment 

Depends on the issuer 

Available only after the 3rd financial year up to the 6th year

Joint Account 


Not allowed

Premature Withdrawal

Permitted for certain types of FDs, subject to a penalty

Permitted after completing 7 years


May vary among FD issuers 

Available to Indian residents only

Tax Benefits

Deduction of up to ₹1.5 Lakhs u/s 80C of the Income Tax Act, 1961, is available on tax-saving FDs 

Deductions of up to ₹1.5 Lakhs u/s 80C contributions made to the account

Understanding Fixed Deposits

A fixed deposit is an account where you can deposit a fixed sum of money for a specific tenor. Depending on when and how this interest is paid out, there are two main types of FDs, as outlined below.

  • Cumulative FDs

In these fixed deposits, the interest is reinvested in the FD account and only paid out at maturity after the completion of the investment tenor. This gives you the benefit of the power of compounding. 

  • Non-cumulative FDs

In non-cumulative FDs, the interest is paid out at frequent intervals. You can opt for monthly, quarterly, semi-annual, or annual payouts. This facility helps you earn income on a steady basis. 

ITR File Kiya Kya?

File online, track refund updates, calculate deductions, and more.
Tax image

Who Should Invest in FDs

In the case of a fixed deposit, you could consider investing in this option if you fall under these categories:

  • Conservative Investor: If you prefer the safety of your deposit and want to earn guaranteed interest on your investment

  • Temporary Investment: If you’re looking to park your surplus funds for a short period in a secure investment tool 

  • Senior Citizen: If you wish to receive a fixed monthly interest payout to supplement your income or pension  

  • Seeking Portfolio Diversification: If you are looking for a safer investment option to add to your financial portfolio

Understanding PPF

PPF is an investment option offered by the Indian government. Many banks offer the facility to open a PPF account. Here are the key features of the PPF investment option.

  • The rate of interest on a PPF account is decided by the government every quarter

  • The interest rate is 7.10% p.a. as of July 2024 

  • To keep your account active, you need to invest a minimum of ₹500 in your PPF account each financial year

  • You can make as few as a single deposit or as many as 12 deposits during the year

  • The interest earned on the investment as well as the maturity proceeds are tax-free

  • You may extend your PPF account by blocks of 5 years after maturity

Who Should Invest in PPF

Investing in the Public Provident Fund may be suitable for you if you have any of the following requirements.

  • Conservative Investor: If you have a low-risk appetite and prefer the safety of your initial investment

  • Seeking Long-term Investment: If you want to invest for the long term to meet future financial goals and do not need a regular extra income

  • Investing for Tax Benefits: If you are looking for tax-saving investments to reduce the tax outgo

Interest Calculation for FDs and PPFs

When it comes to PPFs, the interest that is to be accumulated or compounded is done on a yearly basis. This works for all PPF deposits. For fixed deposits, the interest is calculated through simple interest or compound interest. 


You will get an estimated interest return within seconds through online FD calculators or PPF calculators. You can find these tools on Bajaj Markets and can use them for free as many times as needed. 


All you have to do is enter a few basic variables related to your investment and get an indicative number instantly.  

Loan Availability

You can get a loan against your investment in both FDs and PPF. Here are some essential points to note. 

1. Loan Against a Fixed Deposit

In most cases, you can get a loan against FD at any point during the investment tenor. Typically, you can borrow up to a certain percentage of the fixed deposit amount.


In case you fail to repay the loan, the banks or NBFCs will recover the dues from the FD investment, which acts as collateral for your borrowing.

2. Loan Against a PPF

You can get a loan against your PPF investment only after the 3rd financial year after you have opened your account.


There are other conditions that you need to be aware of, such as the following:

  • You can borrow up to 25% of the account balance at the end of the second year preceding the year in which you apply for the loan 

  • You cannot take a second loan till you repay your first loan 

  • You can only take one loan per financial year

  • If you repay the loan within 36 months, interest will be applicable at the rate of 1% p.a. over the prevailing interest rate

  • If you take longer than 36 months, interest will be applicable at the rate of 6% p.a. over the existing rate

FAQs on FD vs. PPF

PPF or FD, which is better?

A fixed deposit has more liquidity as you can withdraw your FD at any given point by paying a nominal penalty for premature withdrawal. However, PPF has a 15-year lock-in period, thereby having low liquidity. In addition to this, the tenor of an FD is more flexible compared to PPF, thus making FD a better choice in terms of flexibility. 


That said, PPF offers more extensive tax benefits. The principal investment, the returns earned and the withdrawal at maturity are all tax-free. So, if you’re comparing PPF vs fixed deposit as investment options, you can choose the one that offers the financial benefits you’re looking for.

Can I open a joint account if I am investing in an FD or in PPF?

You can open a joint account in case of an FD. However, this is not true in the case of a PPF account. Each individual must have a separate PPF account. 

What should I consider before investing in an FD?

Before investing in an FD, check for the interest rate offered by the bank or NBFC. Moreover, determine the investment amount you can afford and the tenor for the FD.

Which has more liquidity: FD or PPF?

FD has more liquidity when compared to PPF. PPF has a 15-year lock-in period, whereas an FD has a flexible tenor between 7 days and 10 years.

Where should you invest: PPF or FD?

That depends on your financial goals and your investment needs. Each investment option has its own pros and cons. 


For instance, the maximum amount that can be invested in a PPF each year is ₹1.5 lakh. However, there is no such set limit with FDs. Also, a PPF has a lock-in period of 15 years, whereas an FD has more liquidity. In addition to this, an FD also has a non-cumulative option where a monthly, quarterly, half-yearly or an annual payout is provided. Hence, if you want to meet short-term financial goals and need frequent payouts, an FD can be a better choice.


On the other hand, PPF offers more tax benefits and is a long-term investment option. So, you can choose this option if that is what you’re looking for.

What is the maximum amount that can be deposited into a PPF account in a year?

You can invest up to ₹1.5 Lakh per year in your PPF account.

Is it possible to open an FD account as well as a PPF account?

Yes, you can open a fixed deposit account as well as a PPF account in your name.

What is the FD vs PPF interest rate?

Here are a few key details about the interest rates of FDs and PPFs.




Interest Rate

Up to 9.05%


Tax Benefits

Up to ₹1.5 Lakhs

Up to ₹1.5 Lakhs

Tax on Interest


Fully Exempt

How much will I get if I invest ₹5,000 in PPF?

Let’s assume that your yearly investment is ₹5,000 for a period of 15 years. Your PPF interest rate is 7.1%. Therefore, your total interest earned could be around ₹60,600.

Will the PPF account’s term be extended?

Yes, you may extend your PPF account by blocks of 5 years.

Loan Offer
Download App