FD vs PPF vs SIP — Same ₹1 Lakh, Three Outcomes (Worked Comparison)

Quick answer: ₹100,000 for 5 years: an FD at 6.5% quarterly compounding gives ₹1,38,042; PPF at 7.1% annual gives ₹1,40,912; a SIP of the same total at 12% assumed equity returns gives about ₹4,12,432 on ₹3,00,000 invested — but with real volatility and no guarantee. The right choice depends on the goal's date, not on which number is biggest.

The same ₹1 lakh, computed three ways

Instrument	Assumption	5-year outcome	Liquidity
Fixed deposit	6.5% compounded quarterly	₹1,38,042	Breakable (penalty)
PPF	7.1% compounded annually	₹1,40,912	Locked 15 yrs (partial rules)
SIP (equity fund)	12% assumed, volatile	₹4,12,432 on ₹60k/yr invested	Open-ended

The FD and PPF figures are contract-like: the rate is the deal. The SIP figure is a model of a volatile path — the same period could land materially lower. That difference in certainty, not the headline rate, is what separates the three.

Tax treatment changes the ranking

FD interest is taxed as income at your slab, so a 30%-bracket investor keeps ~4.55% net on a 6.5% FD. PPF is exempt-exempt-exempt — its 7.1% is fully kept. Equity SIP gains held over a year attract long-term capital-gains tax only on redemption above the annual exemption. Net-of-tax, PPF often beats the FD despite similar headline rates.

Match the instrument to the goal

This is education, not investment advice. Rates change, tax rules change, and equity outcomes vary. Verify current rates with the issuing institutions before acting.

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Frequently asked questions

Which gives better returns: FD, PPF or SIP?

At 5 years on ₹100,000: FD at 6.5% ≈ ₹1,38,042, PPF at 7.1% ≈ ₹1,40,912, and a ₹20,000/year SIP at 12% assumed ≈ ₹4,12,432 on ₹300,000 invested. But the SIP number is a volatile-market model, not a promise — expected return and certainty are different things.

Is PPF better than FD?

For long-horizon money, usually yes: slightly higher typical rate, fully exempt returns, but a 15-year lock-in. For money you may need sooner, the FD’s liquidity wins.

How is SIP different from FD and PPF?

FD and PPF are debt contracts with fixed rates; a SIP is a method of investing in market assets whose returns fluctuate. Higher expected return comes with real downside years.

How are these three taxed?

FD interest is taxed at your income slab. PPF is fully exempt. Equity fund gains held over a year are long-term capital gains, taxed on redemption above the annual exemption — timing is under your control.

FD vs PPF vs SIP: One Sum, Three Very Different Machines