Indian households have always loved government-backed savings schemes for their safety and guaranteed returns. But with multiple options available, PPF, SSY, Fixed Deposits, NSC, and more, choosing the right one can be confusing.
In this guide, we'll do a deep, side-by-side comparison of the three most popular schemes: Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), and Bank Fixed Deposits (FD).
Quick Comparison Table
| Feature | PPF | SSY | Fixed Deposit |
|---|---|---|---|
| Interest Rate | 7.1% p.a. | 8.2% p.a. | 6.5% to 7.5% p.a. |
| Tax on Deposits | Exempt (section 123 (was 80C)) | Exempt (section 123 (was 80C)) | Section 123 (was 80C) only for Tax-Saver FD |
| Tax on Interest | Exempt | Exempt | Taxable as per slab |
| Tax on Maturity | Exempt | Exempt | No separate tax |
| Tax Status | EEE | EEE | Taxable |
| Lock-in Period | 15 years | 21 years | 5 years (Tax Saver) |
| Min Investment | ₹500/year | ₹250/year | ₹1,000+ (varies) |
| Max Investment | ₹1,50,000/year | ₹1,50,000/year | No upper limit |
| Who Can Open | Any Indian resident | Parent of girl child (below 10) | Any resident/NRI |
| Risk Level | Zero (Govt-backed) | Zero (Govt-backed) | Very Low (DICGC insured) |
Understanding PPF: The All-Rounder
The Public Provident Fund is arguably India's most beloved savings instrument. Introduced in 1968, it has stood the test of time for good reason.
How PPF Works
You open a PPF account at any post office or authorized bank (SBI, HDFC, ICICI, etc.). You deposit a minimum of ₹500 and maximum of ₹1,50,000 per financial year. Interest is compounded annually, but calculated on the monthly minimum balance between the 5th and last day of each month.
Pro Tip: Always deposit your PPF contribution before the 5th of the month to earn interest for that entire month.
PPF Interest Rate History
| Period | Interest Rate |
|---|---|
| FY 2026-27 (current) | 7.1% |
| FY 2024-25 | 7.1% |
| FY 2020-21 | 7.1% (reduced from 7.9%) |
| FY 2018-19 | 8.0% |
| FY 2016-17 | 8.1% |
PPF Maturity Calculation
Investing ₹1,50,000 every year for 15 years at 7.1%:
- Total Invested: ₹22,50,000
- Interest Earned: ₹18,18,209
- Maturity Amount: ₹40,68,209
That's ₹18+ Lakhs in tax-free interest! Calculate your exact returns with our PPF Calculator.
PPF Extension Options
At the end of 15 years, you can:
- Withdraw entirely (tax-free)
- Extend 5 years without contribution, existing balance earns interest
- Extend 5 years with contribution, continue investing ₹1.5 Lakh/year
Many savvy individuals choose Option 3 repeatedly, using PPF as a perpetual tax-free compounding machine.
Understanding SSY: For Your Daughter's Future
Sukanya Samriddhi Yojana was launched in January 2015 under the Beti Bachao Beti Padhao initiative, designed to encourage financial security for the girl child.
Eligibility & Rules
- Account for a girl child below 10 years of age
- Maximum 2 accounts per family (one per girl child)
- Deposits mandatory for the first 14 years
- Account matures 21 years from opening
- At 8.2% p.a., SSY offers the highest rate among all government schemes
SSY Maturity Calculation
Investing ₹1,50,000 every year for 14 years at 8.2%:
- Total Invested: ₹21,00,000
- Interest Earned: ₹46,77,578
- Maturity Amount (year 21): ₹67,77,578
That's ₹46+ Lakhs in tax-free interest, more than double your investment! Explore scenarios with our SSY Calculator.
Partial Withdrawal for Education
When the girl turns 18, up to 50% of the balance can be withdrawn for higher education. Planning for international education? Check our Study Abroad Calculator.
Understanding Fixed Deposits: The Familiar Classic
Current FD Rates (May 2026)
| Bank | 1 Year | 3 Years | 5 Years (Tax Saver) |
|---|---|---|---|
| SBI | 6.80% | 7.00% | 6.50% |
| HDFC Bank | 7.00% | 7.15% | 7.00% |
| ICICI Bank | 6.90% | 7.10% | 7.00% |
| Post Office TD | 7.00% | 7.10% | 7.50% |
| Small Finance Banks | 7.50-8.50% | 7.75-8.50% | 7.50-8.00% |
Rates are indicative and subject to change.
The Tax Problem with FDs
FD interest is fully taxable at your income tax slab rate.
Real Return Calculation (30% slab):
- FD Rate: 7.00%
- Tax on Interest: 7.00% × 30% = 2.10%
- Post-Tax Return: 4.90%
- Inflation: ~5-6%
- Real Return: Negative!
PPF at 7.1% tax-free has a 2.1 percentage point effective advantage over FDs for someone in the 30% bracket. Over 15 years, this compounds into a massive difference.
TDS on FD Interest
Banks deduct TDS at 10% if your total FD interest exceeds ₹40,000/year (₹50,000 for senior citizens). If your actual slab is higher, you'll owe additional tax when filing returns.
When FDs Still Make Sense
- Emergency fund: 3-6 months of expenses in a sweep/liquid FD
- Short-term goals (1-3 years): Wedding, car, vacation
- Senior citizens: Higher rates + predictable income
- Portfolio stability: Stable anchor during equity market volatility
Head-to-Head: Real Returns Over 15 Years
₹1,50,000 invested annually for 15 years:
| Parameter | PPF (7.1%) | SSY (8.2%) | FD (7.0%, 30% slab) |
|---|---|---|---|
| Total Invested | ₹22,50,000 | ₹22,50,000 | ₹22,50,000 |
| Gross Interest | ₹18,18,209 | ₹24,09,382 | ₹16,86,125 |
| Tax on Interest | ₹0 | ₹0 | ₹5,05,838 |
| Net Maturity | ₹40,68,209 | ₹46,59,382 | ₹34,30,288 |
| Effective Return | 7.1% | 8.2% | 4.9% |
The verdict is clear: SSY offers the highest returns (if eligible), followed by PPF. FDs lag significantly due to taxation.
Which Should You Choose?
Choose SSY if:
- You have a daughter below 10 years of age
- You want the highest guaranteed, tax-free returns
- You don't need the money for 21 years
Choose PPF if:
- You want a universal, long-term tax-free savings vehicle
- You're building a retirement corpus alongside EPF
- You want the option to extend beyond 15 years
Choose FD if:
- You need guaranteed returns for a short-term goal (1-5 years)
- You're a senior citizen seeking predictable monthly income
- You've already maxed out section 123 (was 80C) and need safe savings
The Optimal Strategy: Use All Three
For a family with a daughter:
- SSY: ₹1,50,000/year for daughter's future (highest returns)
- PPF: ₹1,50,000/year for retirement corpus (tax-free compounding)
- FD: 3-6 months of expenses as emergency fund (liquidity)
Both SSY and PPF qualify under section 123 (was 80C), but the combined limit is ₹1,50,000. Any amount above ₹1.5 Lakh doesn't get a deduction but still earns tax-free interest.
FAQs
Can NRIs open PPF or SSY accounts?
NRIs cannot open new PPF or SSY accounts. Existing PPF accounts opened before October 2017 can continue until maturity.
What happens if I miss a year's deposit in PPF?
The account becomes "inactive", revive it by paying ₹50 penalty per missed year plus the minimum ₹500 deposit. Interest continues on the existing balance.
Is it better to invest monthly or annually in PPF?
Annually (before April 5th) is mathematically superior, you earn interest on the full amount for 12 months. The difference can be ₹3,000-5,000 over the tenure.
Disclaimer: Interest rates and tax rules mentioned are current as of May 2026 and subject to revision. This article is for educational purposes and does not constitute financial advice.