Fixed deposits, PPF and SIPs are the three savings options most Indian families compare first. They are not competitors so much as tools for different jobs. Here is how they differ — and what the same money grows to in each.
This guide explains how the products work. It is not personal investment advice; your choice depends on your goals, time horizon and tax situation.
The short answer
- FD — for money you may need in 1–5 years, where safety and certainty matter most.
- PPF — for safe, tax-free, long-term savings you won't touch for 15 years.
- SIP (equity mutual funds) — for long-term goals (7+ years) where you can accept ups and downs for potentially higher growth.
Side-by-side comparison
| Fixed Deposit | PPF | Equity SIP | |
|---|---|---|---|
| Returns | Fixed, about 6.5–7.5% p.a. | Fixed by government, 7.1% p.a. at present | Market-linked, not guaranteed |
| Risk | Very low (deposit insurance up to ₹5 lakh per bank) | Very low (government-backed) | Market risk — can fall in the short term |
| Lock-in | Chosen tenure; premature withdrawal with a penalty | 15 years; partial withdrawal from year 7 | None for most funds (3 years for ELSS) |
| Tax on returns | Taxed at your slab rate | Fully tax-free | Equity gains above ₹1.25 lakh a year taxed at 12.5% if held over 1 year |
| Deposit limits | No limit | ₹500 to ₹1.5 lakh a year | From ₹100–₹500 a month |
What ₹1.5 lakh a year becomes in 15 years
Assume you put away ₹1,50,000 every year for 15 years (₹22.5 lakh in total):
- PPF at 7.1%: about ₹40.68 lakh, all tax-free. Check with the PPF Calculator.
- FD at 7% (quarterly compounding), renewed each year: about ₹41 lakh before tax. Because FD interest is taxed every year at your slab rate, the post-tax amount for someone in the 20–30% bracket is noticeably lower — often ₹34–36 lakh. Try the numbers in the FD Calculator.
- Equity SIP of ₹12,500 a month: at an assumed 12% a year, about ₹63 lakh; at an assumed 9%, about ₹48 lakh. Actual results can be higher or lower, and some years will be negative. See the range in the SIP Calculator.
The numbers show the trade-off clearly: PPF wins on certainty and tax, SIPs have the highest potential but no guarantee, and FDs give flexibility at the cost of tax.
When an FD makes most sense
- An emergency fund or money for a goal 1–3 years away (fees, a wedding, a down payment).
- Senior citizens who want regular, predictable income — most banks pay them about 0.5% more.
- When you want to know the exact maturity amount on day one.
When PPF makes most sense
- You are in the old tax regime and want a Section 80C deduction plus tax-free returns.
- You want a safe base for retirement or a child's education that you won't touch for 15 years.
- Depositing before 5 April each year earns interest on the full amount for the year.
When a SIP makes most sense
- Goals 7 years or more away, like retirement or a child's higher education.
- You can stay invested through market falls without stopping your SIP.
- You want to increase the amount every year as your salary grows (a step-up SIP).
A simple way to combine them
Many people use all three: an FD for the emergency fund, PPF for the safe long-term part, and SIPs for long-term growth. Use the free calculators to see what each part becomes, then decide the split that lets you sleep well.