Fixed deposit v/s PPF: Which is better for students?
27 Feb 2026

For Indian students, saving for the future is important.

Two popular investment options are fixed deposits (FDs) and public provident fund (PPF).

Both have their benefits and limitations, making them suitable for different needs and goals.

Knowing the difference between these two can help you make informed decisions about where to park your money.

Here's a look at FDs and PPFs to help you choose wisely.

Understanding fixed deposits
#1

Fixed deposits are a popular investment option offered by banks and financial institutions in India.

They allow you to deposit a lump sum amount for a fixed tenure at a predetermined interest rate.

The tenure can range from seven days to 10 years, giving you flexibility according to your financial goals.

FDs offer guaranteed returns with no market risk, making them ideal for short-term savings.

Features of Public Provident Fund
#2

The Public Provident Fund is a long-term savings scheme backed by the government of India. It has a minimum lock-in period of 15 years, which encourages disciplined saving habits.

The PPF account can be opened with as little as ₹500 and a maximum of ₹1.5 lakh per financial year.

The current interest rate on PPF is tax-free, making it an attractive option for long-term wealth creation.

Comparing returns on investments
#3

When comparing returns on fixed deposits and public provident funds, it's important to look at the interest rates offered by banks on FDs and the government-set rate for PPFs.

While FD rates may vary from bank to bank, they usually range between 5% to 7% per annum depending on the tenure chosen.

On the other hand, PPFs currently offer an interest rate of around 7.1% per annum.

Tax implications for students
Tip 1

Tax implications also play a major role in deciding between FDs and PPFs as an Indian student.

Interest earned from fixed deposits is taxable as per the individual's income tax slab rate, which may reduce overall returns if you fall under higher tax brackets.

However, contributions made towards PPF qualify for deduction under Section 80C up to ₹1.5 lakh annually, along with tax-free maturity proceeds.