PPF vs FD vs NSC
Three safe places for long-term money, and they are not interchangeable. What each promises, how long it locks the money, and how it is taxed.
| PPF | Bank FD | NSC | |
|---|---|---|---|
| Rate | 7.10% a year, notified quarterly | Set by each bank, varies by tenure | 7.70% a year, notified quarterly |
| Who pays | Government of India | The bank, insured up to the DICGC limit | Government of India |
| Term | 15 years, extendable in 5-year blocks | 7 days to 10 years, typically | 5 years |
| Access | Partial withdrawal after 5 years, with conditions | Breakable any time, usually at a penalty | Locked for 5 years |
| Tax on interest | Tax-free | Taxed at your slab every year | Taxed at your slab every year |
| Section 80C | Yes | Only the 5-year tax-saver FD | Yes |
| Best fit | Retirement, long compounding | Money needed at a known date | A 5-year block with 80C |
The tax difference is bigger than the rate difference
PPF interest is exempt at all three stages — you get a deduction on what you put in, the interest is not taxed as it builds, and the maturity amount is not taxed. An FD paying a higher headline rate can still leave you with less, because its interest is taxed at your slab every year.
At a 30% slab, an FD needs to pay roughly 10.1% to match a 7.10% tax-free PPF. No bank FD currently pays that. For anyone in the 20% or 30% bracket, PPF wins on after-tax return unless the money must stay reachable.
When an FD is the right answer anyway
- You need the money in two or three years. PPF's 15-year term and 5-year lock make it unsuitable for that.
- You want a fixed rate for a known period. PPF's rate is re-notified every quarter.
- You are in a low tax bracket, where the tax drag is small.
What NSC adds
NSC sits between the two: a government-backed 5-year certificate at 7.70%, with 80C on the investment, but the interest is taxable. It suits someone who wants a five-year block and has 80C room left after PPF.
Rates: 7.10% for PPF and 7.70% for NSC, notified for the quarter beginning 2026-10-01 — National Savings Institute. Bank FD rates vary by bank and tenure, so each bank's record links to its own rate card.