Updated: March 2026
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RD vs FD vs PPF — Best Monthly Savings Option
Recurring Deposit for short-term discipline, FD for lump sum safety, PPF for long-term tax-free growth — each serves a different purpose.
RD Rate
6.5-7%
FD Rate
6.5-7.5%
PPF Rate
7.1%
Tax
RD/FD taxable, PPF free
📊Comparison
| Feature | Recurring Deposit (RD) | Fixed Deposit (FD) | PPF |
|---|---|---|---|
| Deposit type | Monthly fixed amount | Lump sum one-time | Flexible (₹500-1.5L/year) |
| Interest rate | 6.5-7% (same as FD) | 6.5-7.5% | 7.1% (government-set) |
| Tax on interest | Fully taxable as income | Fully taxable as income | 100% tax-free |
| Lock-in | 6 months to 10 years | 7 days to 10 years | 15 years (partial after 7) |
| Tax deduction | No 80C benefit | 5-year tax saver FD: 80C | 80C up to ₹1.5L |
| Risk | Zero (bank guarantee) | Zero (bank guarantee) | Zero (government guarantee) |
| Best for | Short-term monthly savings goal | Parking lump sum safely | Long-term retirement/tax saving |
| Premature withdrawal | Allowed with penalty | Allowed with penalty | Not allowed (except specific cases) |
🎯Which to Use When
Monthly savings habit + short term goal (1-3 years): RD. Example: saving ₹10,000/month for a vacation in 18 months.
Lump sum money + safety: FD. Example: parking ₹5 lakh from bonus in 1-year FD while deciding where to invest.
Tax saving + long term (15+ years): PPF. Example: ₹1.5 lakh/year into PPF for retirement — tax-free maturity at ₹40+ lakh after 15 years.
Smart combo: PPF for tax saving (₹1.5L annual), SIP for growth (₹5-10K/month in equity MF), RD for short-term goals (₹5K/month), FD for emergency fund (6 months expenses).
❓Frequently Asked Questions
Information is for educational purposes. Verify details from official sources.