For 30% slab investors: FD at 7.5% gives only 5.18% effective post-tax return — lower than PPF's 7.1%. For 0% slab (below exemption limit): FD at 7.5% beats PPF. The crossover is around the 12% slab.
PPF vs FD — Frequently Asked Questions
Is PPF better than FD after tax?+
For investors in the 20% or 30% tax slab: yes, PPF at 7.1% tax-free gives more than FD at 7.5% after tax. At 30% slab, FD interest is effectively taxed at 30%, giving a post-tax yield of 5.25% — compared to PPF's full 7.1%. For taxpayers in the 0% bracket (income below ₹3 lakhs), FD at 7.5% beats PPF.
What is the lock-in period for PPF vs FD?+
PPF has a 15-year lock-in with partial withdrawals allowed from year 7. Tax-saving FD has a 5-year lock-in with no premature withdrawal. Regular FDs offer flexible tenures from 7 days to 10 years with premature withdrawal (with penalty). PPF's EEE status justifies the longer lock-in for most long-term investors.
Can I have both PPF and FD investments?+
Yes — and this is the optimal strategy. Max out PPF at ₹1.5 lakh/year for 80C benefit and tax-free returns. Use FD for shorter-term goals (1–5 years) where liquidity matters more. For amounts above ₹1.5 lakh with a 5+ year horizon, debt mutual funds often beat FDs post-tax. PPF and FD serve different needs and work well together.