FD vs RD vs PPF: Which Should You Choose?
Fixed Deposit, Recurring Deposit and PPF are the three most common guaranteed-return savings options in India — but they differ significantly on lock-in, liquidity, taxation and who they suit.
The core difference
All three are principal-protected, meaning your invested amount isn't exposed to market risk — the return is fixed or government-set rather than tied to markets. The difference is how you deposit money, how long it's locked in, and how it's taxed.
| Factor | Fixed Deposit | Recurring Deposit | PPF |
|---|---|---|---|
| Deposit style | One-time lump sum | Fixed monthly installment | Flexible, up to ₹1.5L/year |
| Typical tenure | 7 days to 10 years, your choice | 6 months to 10 years, your choice | 15 years (extendable in 5-yr blocks) |
| Who sets the rate | Individual bank | Individual bank | Government, reviewed quarterly |
| Interest taxation | Fully taxable as per your slab; TDS above ₹40,000/₹50,000 | Fully taxable as per your slab | Tax-free (EEE status) |
| Section 80C benefit | Only 5-year tax-saver FDs qualify | Not eligible | Yes, up to ₹1.5L/year (old regime) |
| Liquidity | Premature withdrawal usually allowed with a penalty | Premature closure usually allowed with a penalty | Locked for 15 years; partial withdrawal from year 7 only |
| Best suited for | Lump sum you already have and want parked safely | Building a monthly saving habit from income | Very long-term, tax-free goals (retirement, child's education) |
How the numbers actually compare
A useful way to decide isn't to compare headline interest rates directly — since PPF's return is tax-free while FD/RD interest is fully taxable, PPF's effective return is higher than its quoted rate for anyone in a taxable income bracket. For a taxpayer in the 30% bracket, a 7% taxable FD return is roughly equivalent to a 4.9% post-tax return — often lower than PPF's post-tax return even when PPF's quoted rate looks similar or slightly lower.
Run your own numbers with the FD Calculator, RD Calculator and PPF Calculatoron this site — enter the same amount and tenure across all three to see the pre-tax maturity values side by side, then apply your own tax slab to compare what you'd actually keep.
A simple way to choose
If you have a lump sum and might need it back within a few years, FD's flexibility on tenure makes it the easiest fit. If you're building a saving habit from monthly income and don't have a lump sum to start with, RD matches that cash flow. If the money is for a goal that's genuinely 15+ years away and you want a government-backed, tax-free return with no market risk, PPF is usually the strongest option — provided you're comfortable locking it in for that long.
Checked against official sources as of August 2026. See our editorial process. For informational purposes only — not financial or tax advice.