Finacolada
Government schemes

PPF vs SSY vs NSC vs FD: Which Fits Your Goal?

PPF vs SSY vs NSC vs FD compared: tenure, lock-in, deposit limits, how rates are set and taxed, plus computed examples of tax-free compounding.

Updated · 8 min read

If you want low-risk savings in India, four names come up again and again: the Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC) and the humble bank fixed deposit (FD). They look similar from a distance. Up close, they differ in who can open them, how long your money is locked, how the rate is set and, often most important, how they are taxed.

This guide compares their structure. It deliberately does not quote “current” rates, because small-savings rates are reset every quarter. For this quarter’s numbers, see our small-savings rates page.

Key takeaways

  • PPF: 15-year, tax-free, flexible yearly deposits. The workhorse for long-term, low-risk savings.
  • SSY: only for a daughter under 10; tax-free; built for her education and marriage.
  • NSC: 5-year, rate locked at purchase, interest taxable, deposit deduction under the old regime.
  • FD: most flexible, rate set by the bank, interest fully taxable at your slab rate.
  • Tax treatment can matter as much as the headline rate over 15+ years.

The comparison at a glance

PPF SSY NSC Bank FD
Who can open Any resident individual (one account, plus one for a minor as guardian) Parent or guardian of a girl under 10 Individuals, including joint holders and guardians of minors Almost anyone
Tenure 15 years, extendable in 5-year blocks Matures 21 years after opening; deposits for 15 years 5 years 7 days to 10 years, your choice
Deposit limits ₹500 to ₹1.5 lakh per financial year ₹250 to ₹1.5 lakh per financial year From ₹1,000; no upper limit Bank’s minimum; no upper limit
Rate set by Government, quarterly Government, quarterly Government, quarterly Your bank
Does your rate change? Yes, applies to the whole balance each quarter Yes, as with PPF No, locked at purchase No, locked at booking (for fixed-rate FDs)
Compounding Yearly Yearly Yearly, paid at maturity Usually quarterly
Access before maturity Loans in early years; partial withdrawals from year 7 Limited partial withdrawal for education after 18 Only in specified cases Usually allowed with a penalty (not for 5-year tax-saver FDs)
Tax on deposit (old regime) Deduction available Deduction available Deduction available Only 5-year tax-saver FDs
Tax on interest Tax-free Tax-free Taxable Taxable at slab rate

Rules as of October 2026, summarised in general terms. Scheme rules and tax laws change; check the official scheme rules and current tax rules before investing.

A note on tax regimes: deductions on deposits (the “tax on deposit” row) are generally available only if you file under the old tax regime. Tax-free interest on PPF and SSY applies either way.

PPF: the long-term all-rounder

What it is: a 15-year account at a post office or authorised bank. You deposit any amount between ₹500 and ₹1.5 lakh each financial year, in one go or in instalments.

How the rate works: the government notifies the rate each quarter, and it applies to your whole balance. Interest is calculated monthly on the lowest balance between the 5th and the end of the month, and credited once a year. Depositing before the 5th of a month, especially before 5 April, earns you slightly more.

Access: loans are available in the early years; partial withdrawals are allowed from the seventh financial year; premature closure is possible after five years only for specified reasons and with an interest penalty. After 15 years you can close it, or extend it in 5-year blocks with or without fresh deposits.

Often suits: long-term goals where you value certainty and tax-free growth, including the low-risk part of a retirement portfolio.

SSY: for a daughter’s future

What it is: an account opened by a parent or guardian in the name of a girl under 10. Generally up to two accounts per family, with exceptions for twins or triplets. Deposits run for 15 years from opening; the account matures 21 years from opening.

How the rate works: notified quarterly like PPF. In recent years it has been set higher than the PPF rate; check the rates page for the current figure.

Access: a partial withdrawal is allowed for the girl’s higher education once she turns 18 or passes Class 10, and the account can be closed for her marriage after 18.

Often suits: parents of young daughters who want a dedicated, tax-free, long-term pot for her education or marriage.

NSC: five years, rate locked in

What it is: a five-year savings certificate from the post office. No upper limit on investment.

How the rate works: the rate on the day you invest is fixed for all five years. Interest compounds yearly and is paid at maturity.

Tax: the deposit qualifies for a deduction under the old regime. Interest is taxable, but interest that accrues in the first four years is treated as reinvested and can itself be claimed as a deduction in those years. The fifth year’s interest is taxable without that relief.

Access: premature encashment is only allowed in specific situations, such as the holder’s death or a court order.

Often suits: a medium-term goal around five years away, where you want a known, locked rate, especially if you still use the old tax regime.

Bank FD: maximum flexibility

What it is: a deposit with a bank for a term you choose, from a week to ten years.

How the rate works: each bank sets its own rates, which change with market conditions. The rate is locked when you book.

Tax: interest is added to your income and taxed at your slab rate as it accrues, even if you do not withdraw it. Banks may deduct tax at source above a threshold. Five-year tax-saver FDs qualify for a deduction under the old regime but cannot be broken early.

Safety: bank deposits are insured by the DICGC up to a limit per depositor per bank, including interest. That limit has been ₹5 lakh since 2020 and a higher cap has been under discussion, so check the DICGC website for the current figure. Amounts above the limit depend on the bank’s own strength.

Often suits: emergency funds, short-term goals and money you may need at short notice.

Why tax matters so much over 15 years

Headline rates hide tax. Here is the same deposit growing at the same pre-tax rate, with and without tax on the interest.

Assumptions: ₹1.5 lakh deposited at the start of each year for 15 years; an illustrative 7% a year, compounded yearly (not a current rate); in the taxed cases, tax is paid on each year’s interest from the account, so the effective growth rate is 7% × (1 − tax rate).

Tax on interest Value after 15 years Total deposited
None (tax-free, like PPF) ₹40.33 lakh ₹22.50 lakh
20% ₹35.77 lakh ₹22.50 lakh
30% ₹33.70 lakh ₹22.50 lakh

At the same 7%, the tax-free route ends about ₹6.6 lakh higher than the 30%-taxed route. That is why a slightly lower-rate tax-free product can beat a higher-rate taxable one for someone in a higher slab.

How SSY and NSC grow: two quick illustrations

SSY over 21 years

Assumptions: ₹1.5 lakh at the start of each year for 15 years; no deposits in years 16–21; compounded yearly; rates are illustrative and held constant (actual rates change quarterly).

Illustrative rate Value at maturity (year 21) Total deposited
7% ₹60.53 lakh ₹22.50 lakh
8% ₹69.80 lakh ₹22.50 lakh

The six years with no deposits are where much of the growth happens: compounding keeps working on the full balance.

NSC over five years

Assumptions: ₹1 lakh invested; an illustrative 7.5% rate locked for five years; compounded yearly, paid at maturity.

Year Interest accrued that year
1 ₹7,500
2 ₹8,062
3 ₹8,667
4 ₹9,317
5 ₹10,016
Maturity value ₹1.44 lakh

For comparison, ₹1 lakh in a 5-year FD at an illustrative 7% with quarterly compounding grows to about ₹1.41 lakh, but all of that interest is taxable as it accrues.

Choosing by goal

Your goal Often a natural fit Why
Emergency fund FD (or a savings account) Can be broken quickly
Goal in 1–3 years FD Flexible tenures, known rate
Goal in about 5 years NSC or a 5-year deposit Locked rate for the full term
Daughter’s education or marriage, 15+ years away SSY Tax-free, dedicated, long tenure
Long-term low-risk savings or retirement PPF Tax-free, flexible deposits, extendable

Most families end up with more than one. A common pattern is an FD for emergencies, PPF as a steady long-term base and SSY if they have a young daughter.

A few practical tips

  • Deposit early in the financial year for PPF and SSY to earn interest on the full amount for longer.
  • Keep accounts active with at least the minimum yearly deposit; inactive accounts usually need a penalty to revive.
  • Ladder FDs across maturities so not everything renews at once.
  • Do not lock away your emergency fund in PPF or SSY.

What to do next

This is general education about how these products work, not personalised financial or tax advice.

Frequently asked questions

Which is better: PPF, SSY, NSC or FD?

Each suits a different goal. PPF fits long-term, tax-efficient savings with a 15-year horizon. SSY is only for a daughter under 10 and suits her education or marriage goals. NSC is a five-year fixed-rate option with a tax deduction on the deposit under the old regime. FDs are the most flexible but their interest is fully taxable. Match the product to the goal and timeline.

How often do PPF, SSY and NSC interest rates change?

The government notifies small-savings rates every quarter. For PPF and SSY, the notified rate applies to the whole balance during that quarter, so your rate can change over the life of the account. For NSC, the rate on the day you invest is locked for the full five years. Check our rates page for the current quarter.

Is PPF interest tax-free?

Yes. PPF is commonly described as exempt-exempt-exempt: deposits qualify for a deduction under the old tax regime, and both the interest and the maturity amount are tax-free. The deduction on deposits is generally not available under the new tax regime, but the tax-free interest and maturity still apply. Check current rules for your situation.

Can I withdraw money from PPF or SSY before maturity?

Only in limited ways. PPF allows partial withdrawals from the seventh financial year and loans in earlier years, with premature closure after five years only for specified reasons. SSY allows a partial withdrawal for the girl's education after she turns 18 or passes Class 10, and closure for her marriage after 18. Both are designed for long-term savings.

Is NSC interest taxable?

Yes, NSC interest is taxable. Under the old regime, the deposit qualifies for a deduction, and interest that accrues in the first four years is treated as reinvested, which can also be claimed as a deduction in those years. The final year's interest is generally taxable without that benefit. Check current rules and your tax regime.

Is an FD safer than PPF or NSC?

They carry different kinds of safety. PPF, SSY and NSC are government-backed small-savings schemes. Bank FDs are covered by DICGC deposit insurance up to a limit per depositor per bank, which has been ₹5 lakh including interest; check DICGC for the current limit. Beyond that, safety depends on the bank. FDs are, however, far more liquid than PPF or SSY.