PPF, FD and RD are the three most popular "safe money" options in India. All three protect your capital — but they suit completely different goals. Pick the wrong one and you either lock money away too long or lose out on returns and tax benefits. Here's how to choose.
The one-line difference
- PPF (Public Provident Fund) — a 15-year, government-backed, fully tax-free way to build long-term savings.
- FD (Fixed Deposit) — park a lump sum for a fixed term at a fixed rate. Flexible tenure, taxable interest.
- RD (Recurring Deposit) — deposit a fixed amount every month for a set term. Good for building a habit from monthly income.
Side by side
| Feature | PPF | FD | RD |
|---|---|---|---|
| How you invest | Yearly (up to ₹1.5L) | One lump sum | Fixed monthly |
| Typical rate | ~7.1% | ~6.5–7.5% | ~6.5–7.5% |
| Lock-in | 15 years | Your chosen term | Your chosen term |
| Interest taxed? | No — tax-free | Yes, at slab | Yes, at slab |
| 80C deduction? | Yes (up to ₹1.5L) | Only 5-yr tax-saver FD | No |
| Best for | Long-term, tax-free | Lump sum, short-mid term | Monthly saving habit |
The tax angle that changes everything
PPF's big edge is EEE tax status: your contribution qualifies for 80C, the interest is tax-free, and the maturity amount is tax-free. FD and RD interest, by contrast, is added to your income and taxed at your slab rate — so if you're in the 30% bracket, a 7% FD is really giving you closer to 4.9% after tax. PPF's 7.1% is effectively much higher for a high earner because it's tax-free.
The catch with PPF: the lock-in
That tax-free return comes with a 15-year commitment (partial withdrawals only after year 7). So PPF is for money you genuinely won't need for a long time. FDs and RDs let you pick a term from months to years, so they're right when you have a nearer goal or want access.
A simple way to choose
| Your situation | Best fit |
|---|---|
| Long-term, don't need the money, want tax-free growth | PPF |
| Have a lump sum, goal in 1–5 years | FD |
| Want to save a fixed amount from each salary | RD |
| In a high tax bracket, long horizon | PPF (tax-free wins) |
| Need the option to withdraw | FD / RD |
Where do returns actually differ?
Over a long horizon, PPF's tax-free compounding usually beats a taxable FD/RD at the same headline rate — especially for higher earners. But for short-term goals, the flexibility of FDs and RDs matters more than the small rate difference. And remember: all three are "safe" but low-return; for goals more than 7–10 years away, an equity SIP has historically grown money far faster (with more ups and downs).
The best way to see the difference is to run your own numbers — use the PPF, FD and RD calculators to compare maturity amounts for your amount and timeline.