PPF, FD, RD and NPS are the four schemes most Indian savers reach for. They are all low to moderate risk, but they differ sharply on lock-in, tax treatment and what they are good for. Here is how to match each to a goal.
The four at a glance
| Scheme | Typical return | Lock-in | Tax | Best for |
|---|---|---|---|---|
| PPF | ~7.1% | 15 years | Fully tax-free (EEE) | Long-term, tax-free corpus |
| FD | ~6.5 to 7.5% | Flexible (a chosen term) | Interest taxed at slab | Parking a lumpsum safely |
| RD | ~6.5 to 7% | The chosen term | Interest taxed at slab | Building a habit from monthly cash flow |
| NPS | ~9 to 11% | Until age 60 | Partly tax-free; pension taxed | Retirement, with an extra 80CCD(1B) deduction |
How to choose
- PPF is the quiet winner for long-term, safe, tax-free growth. Its effective return beats a taxable FD of the same headline rate because the maturity is fully exempt. The catch is the 15-year lock-in.
- FD is for a lumpsum you want kept safe and accessible, an emergency fund or a goal a few years away. Interest is taxed at your slab, so the real return is lower than it looks.
- RD is the FD's monthly cousin: ideal when you want to save a fixed sum every month at a guaranteed rate, with no market risk.
- NPS is built for retirement. It invests across equity and bonds for a higher long-run return, locks money until 60, and offers an extra Rs 50,000 deduction under 80CCD(1B) on top of 80C.
Run the numbers
Compare maturity values in the PPF, FD, RD and NPS calculators, and turn on inflation to see the real, after-inflation value. For anything longer than ten years, also compare against an equity SIP: safety has a cost, and over long horizons inflation can quietly erode a low fixed return.