FD vs RD vs PPF vs SSY vs NPS: Which One Suits You?
Indian savers have many low-risk options, and each locks your money for a different time and is taxed differently. This guide compares fixed deposits, recurring deposits, PPF, Sukanya Samriddhi Yojana (SSY) and the National Pension System (NPS) in plain terms.
Key takeaways
- FD and RD are flexible and simple, but the interest is taxable every year.
- PPF and SSY are government schemes with long lock-ins and tax-free interest and maturity.
- NPS is for retirement. It is market-linked, and part of the money must buy an annuity.
Fixed Deposit (FD)
You deposit a lump sum with a bank for a fixed period at a fixed rate. Premature withdrawal is usually allowed with a penalty. Interest is added to your income and taxed at your slab rate. Banks deduct TDS once interest crosses a threshold, and you can submit the relevant form if your income is below the taxable limit. FDs suit short and medium goals and people who want certainty.
Recurring Deposit (RD)
An RD works like an FD, but you deposit a fixed amount every month. It is a good way to build a habit and save for a goal within a few years. Tax treatment is the same as an FD.
Public Provident Fund (PPF)
PPF has a 15-year lock-in with limited partial withdrawals after a few years. The interest rate is set by the government and is currently 7.1%, reviewed regularly. PPF is EEE: the contribution qualifies for deduction under Section 80C in the old regime, the interest is tax-free and the maturity amount is tax-free. It is backed by the government, which makes it very safe.
Sukanya Samriddhi Yojana (SSY)
SSY is for the girl child, opened by a parent or guardian while she is young. The current rate is 8.2%, and the account has a long tenure with partial withdrawal allowed for education or marriage after the girl reaches a set age. It also enjoys tax-free interest and maturity, with 80C benefit in the old regime. Check the latest rules on deposit period and withdrawals before opening.
National Pension System (NPS)
NPS invests in a mix of equity, corporate bonds and government securities, so returns are not fixed. Money is locked in until retirement age, with limited withdrawals before that. On exit, a portion must be used to buy an annuity. In the old regime you can claim an extra ₹50,000 deduction under Section 80CCD(1B) over and above the 80C limit. NPS suits long-term retirement saving where you accept market risk.
Quick comparison
- Liquidity: FD and RD high, PPF and SSY low, NPS lowest.
- Return type: FD and RD fixed, PPF and SSY government-set, NPS market-linked.
- Tax on interest: FD and RD taxable, PPF and SSY exempt, NPS taxed at exit under current rules.
Worked example
If ₹1,00,000 stayed in PPF for 15 years at a steady 7.1% (the rate can change), it would grow to about ₹2.80 lakh, all tax-free. Now compare after-tax FD interest. Suppose an FD earns ₹50,000 in a year and you are in the 30% slab. Tax is ₹15,000 plus 4% cess (₹600), which is ₹15,600, leaving ₹34,400. The same ₹50,000 earned in PPF would stay whole, which is why a tax-free rate can beat a higher taxable one for high earners.
Try the calculator
FD CalculatorRD CalculatorPPF CalculatorSukanya Samriddhi CalculatorNPS Calculator
Frequently asked questions
Which is the safest option?
PPF and SSY are backed by the government. Bank FDs and RDs are also considered low risk, with deposit insurance up to the limit set by law.
Is PPF interest taxable?
No. In PPF the interest and the maturity amount are tax-free under current rules.
Is NPS better than PPF?
They serve different goals. NPS is market-linked with potential for higher growth and extra old-regime deduction, while PPF gives government-set returns and easier terms. Many people use both.
Can I use FD, PPF and NPS together?
Yes. A common approach is FD or RD for near goals, PPF for safe long-term savings and NPS or equity funds for retirement.