Different instruments for different jobs
A fixed deposit is a contract with a bank for a chosen tenure, from days to years, with penalties for early exit. PPF is a long-term government scheme with a fifteen-year term, an annual contribution ceiling, and strictly limited partial withdrawal and loan facilities.
That difference in liquidity is the first filter. Money you might need within a few years does not belong in PPF, however attractive its treatment.
Why post-tax comparison matters
Deposit interest is added to your income and taxed at your slab rate, so a headline deposit rate is worth materially less after tax to someone in a higher bracket. PPF interest is not taxed in the same way, so its stated rate is closer to what you keep. Comparing the two gross rates side by side systematically favours the deposit and leads to the wrong conclusion.
Contribution rhythm
PPF suits steady annual contributions within its ceiling, and crediting conventions reward contributing early in the year rather than at the deadline. Deposits suit lump sums — a bonus, a maturity, proceeds from a sale — and let you match a maturity date to a known expense.
- Near-term or uncertain need: deposit, possibly laddered.
- Long-horizon, tax-aware, disciplined annual saving: PPF.
- Many households use both, for different money.
Run both projections
Project the PPF corpus over the full term at the current rate, and project the deposit at its rate for the tenure you would actually choose, then reduce the deposit interest by your slab rate. Compare those two numbers. Rates on both are reviewed periodically, so treat any long projection as an assumption rather than a promise.