Last updated: November 7, 2026
Ask five people in your family where to keep savings and you’ll probably get three answers: “PPF, it’s tax-free”, “FD, it’s safe”, and “start an RD, it builds discipline.” All three are right, just for different goals.
This PPF vs FD vs RD guide puts all three side by side with current rates and simple ₹ examples, so you can match each one to what you’re actually saving for.
In my family, we use all three, but for different jobs: PPF has been running for years as the long-term, don’t-touch pot, an FD holds the emergency fund because it can be broken if needed, and a small RD runs every month for short goals. That split is exactly why I wrote this guide the way I did — no single option wins, the job decides.
The quick answer
- PPF if you’re saving for something 15 years away (retirement, a child’s education) and want tax-free returns.
- FD if you already have a lump sum and need it back in 1–5 years.
- RD if you want to save a fixed amount every month toward a goal 1–5 years away.
Current interest rates (October–December 2026)
The government sets PPF and post office deposit rates every quarter. For October–December 2026, these rates were kept unchanged from the previous quarter:
| Scheme | Interest rate (per year) |
|---|---|
| Public Provident Fund (PPF) | 7.1% |
| Post Office 1-year Time Deposit | 6.9% |
| Post Office 2-year Time Deposit | 7.0% |
| Post Office 3-year Time Deposit | 7.1% |
| Post Office 5-year Time Deposit | 7.5% |
| Post Office 5-year Recurring Deposit | 6.7% |
Bank FD and RD rates are set by each bank and change often, so check your bank’s website for today’s rate. Senior citizens usually get a little extra on bank deposits.
PPF vs FD vs RD: side-by-side comparison
| PPF | Fixed Deposit (FD) | Recurring Deposit (RD) | |
|---|---|---|---|
| How you invest | Any amount, any time in the year | One lump sum | Fixed amount every month |
| Minimum / maximum | ₹500 to ₹1.5 lakh per financial year | Varies by bank; no upper limit | Usually from ₹100–500 a month |
| Lock-in | 15 years (partial withdrawal from year 7) | 7 days to 10 years, your choice | 6 months to 10 years |
| Breaking early | Only in limited cases | Allowed, usually with a small penalty | Allowed, usually with a penalty |
| Tax on interest | Tax-free | Taxable at your slab rate | Taxable at your slab rate |
| Tax saving on deposit | Section 80C, old tax regime only | Only 5-year tax-saver FD, old regime only | No |
| Safety | Government-backed | Bank deposits insured up to ₹5 lakh per bank by DICGC | Same as FD |
| Best for | Long-term, tax-free savings | Parking a lump sum safely | Building a habit for a short goal |
What your money becomes: real examples
These are approximate figures, assuming today’s rates stay the same for the whole period. In reality, PPF and deposit rates can change every quarter, so treat these as a guide, not a promise.
PPF: ₹5,000 a month for 15 years
If you put ₹60,000 a year into PPF (₹5,000 a month, deposited at the start of each year) at 7.1%, you’d have roughly ₹16.27 lakh after 15 years. You’d have deposited ₹9 lakh, so about ₹7.27 lakh is interest, and none of it is taxed.
Post Office RD: ₹5,000 a month for 5 years
At 6.7%, a ₹5,000 monthly RD for 5 years grows to roughly ₹3.57 lakh. You’d have deposited ₹3 lakh. The interest of about ₹57,000 is taxable.
Post Office 5-year Time Deposit: ₹1 lakh lump sum
At 7.5%, ₹1 lakh becomes roughly ₹1.45 lakh after 5 years. The interest is taxable, but if you’re in the old tax regime, this 5-year deposit also qualifies for Section 80C.
Notice the trade-off. PPF gives tax-free growth, but you can’t touch most of it for years. FDs and RDs give you flexibility, but tax takes a share of the interest, especially if you’re in a higher slab.
PPF vs FD vs RD: which one should you pick?
Choose PPF if…
- You’re saving for a goal 15+ years away
- You want a guaranteed, government-backed, tax-free return
- You’re in the old tax regime and want an 80C deduction
Choose an FD if…
- You have a lump sum (bonus, gift, maturity amount) and need it within 1–5 years
- You’re building an emergency fund and want it safe and accessible
- You want to choose the exact maturity date
Choose an RD if…
- You don’t have a lump sum but can save a fixed amount each month
- You’re saving for something specific: a trip, a bike down payment, a wedding gift fund
- You want saving to happen automatically before you can spend
You don’t have to pick only one. A common, simple setup is: an FD for your emergency fund, an RD for a short-term goal, and PPF for the long term. If you haven’t set a monthly budget yet, the 50/30/20 rule is an easy way to decide how much goes where.
If someone is saving for the first time, I would suggest starting with an RD, not PPF. An RD builds the habit without locking money away for 15 years, and once saving every month feels normal, PPF becomes the obvious second step for the long term.
Mistakes to avoid
- Missing the yearly PPF deposit. You must deposit at least ₹500 every financial year, or the account becomes inactive and you’ll pay a small penalty to revive it.
- Forgetting tax on FD interest. FD and RD interest is added to your income. Banks may deduct TDS, and you still need to show the interest when you file your return.
- Keeping more than ₹5 lakh in one bank. DICGC insurance covers up to ₹5 lakh per depositor per bank. If you have more, consider spreading it across banks.
- Breaking an FD for small expenses. If you often need small amounts, split one big FD into a few smaller ones so you only break what you need.
Key takeaways
- PPF currently pays 7.1%, tax-free, with a 15-year lock-in.
- FDs suit lump sums you need back within a few years.
- RDs suit fixed monthly saving toward a short goal.
- Rates on PPF and post office schemes are reviewed every quarter, so check the latest before investing.
Sources
- Department of Economic Affairs, Ministry of Finance – small savings interest rates
- India Post – Post Office Savings Schemes
- DICGC – Deposit insurance
- Income Tax Department
Frequently Asked Questions
Is PPF better than FD?
For long-term savings, PPF often works out better because the interest is tax-free. For money you need within a few years, an FD is more practical because PPF has a 15-year lock-in.
Can I open a PPF account in a bank?
Yes. You can open a PPF account at a post office or at authorised banks, and many banks let you open it online through net banking.
Is RD interest taxable?
Yes. RD interest is added to your income and taxed at your slab rate, just like FD interest.
What happens to my PPF rate if the government changes it?
The new rate applies to your whole PPF balance from that quarter onward. This is different from an FD, where your rate is fixed for the full term when you open it.
This article is for general information and is not financial or tax advice. Rates and rules change, so check official sources or speak to a qualified advisor before investing.