Guides / SIP vs FD vs PPF vs RD: Which Is Better? A Complete Comparison
SIP vs FD vs PPF vs RD: Which Is Better? A Complete Comparison
4 Oct 2026SIP, FD, PPF and RD are not rivals. They solve different problems. A SIP is market-linked and aims for higher long-term growth with risk. An FD gives a fixed return on a lump sum. An RD does the same for a monthly amount. PPF is a government-backed, 15-year savings scheme with tax-free returns.
The right choice depends on how long you can stay invested, how much risk you can take and what you need the money for. This guide compares all four with real numbers, including what you keep after tax.
The four options in one table
| SIP (equity funds) | FD | RD | PPF | |
|---|---|---|---|---|
| What it is | Monthly investment in mutual funds | Lump sum in a bank for a fixed term | Monthly deposit in a bank | Government savings scheme |
| Return | Market-linked, not guaranteed | Fixed at booking | Fixed at booking | Set by the government each quarter |
| Illustrative rate | 8% to 12% (assumption) | About 7% | About 6.5% | 7.1% for Oct to Dec 2026 |
| Risk | High in the short term | Very low | Very low | Very low |
| Lock-in | None (most funds) | Chosen term, early exit has a penalty | Chosen term, up to 10 years | 15 years |
| Tax on gains | 12.5% long-term above ₹1.25 lakh a year | Taxed at slab rate | Taxed at slab rate | Tax-free |
| Best for | Goals 7+ years away | Lump sums for short and medium goals | Building savings for goals up to 5 to 10 years | Long-term safe, tax-free growth |
The FD and RD rates are only examples, because banks differ and rates move with RBI policy. Check the current rate at your bank.
How each one works
SIP: monthly investing in the market
You put a fixed amount into a mutual fund every month. The value goes up and down, and over many years equity funds have historically beaten fixed deposits, but there is no guarantee. See what a SIP is and how it works.
FD: a fixed return on a lump sum
You deposit a lump sum and the bank pays a fixed rate. Most banks compound quarterly. ₹5 lakh at 7% for 5 years grows to about ₹7.07 lakh.
RD: a fixed return, built monthly
You deposit a fixed amount every month for a chosen period (up to 10 years at most banks). ₹10,000 a month at 6.5% for 5 years becomes about ₹7.1 lakh. See FD vs RD.
PPF: safe, long, tax-free
You invest up to ₹1.5 lakh a year for 15 years, with the option to extend. The interest rate is set every quarter, and interest and maturity are tax-free under current rules. See the PPF guide.
The numbers: ₹10,000 a month
Here is what happens if you invest ₹10,000 a month in each option. The equity SIP assumes 12%, which is optimistic, so I show lower cases below. PPF assumes ₹1.2 lakh a year at 7.1%. The RD assumes a steady 6.5%.
Before tax
| Years | You invest | SIP at 12% | RD at 6.5% | PPF at 7.1% |
|---|---|---|---|---|
| 10 | ₹12 lakh | ₹23.2 lakh | ₹16.9 lakh | Not available (15-year lock-in) |
| 15 | ₹18 lakh | ₹50.5 lakh | ₹30.4 lakh | ₹32.6 lakh |
An RD usually runs up to 10 years. The 15-year RD figure assumes you renew it at the same rate, which may not happen. PPF is locked for 15 years, so it has no 10-year result.
After tax (30% tax slab)
This is the figure that matters most. It assumes you redeem the SIP once at the end (equity gains above ₹1.25 lakh taxed at 12.5% plus cess) and pay slab-rate tax on RD interest.
| Years | SIP after tax | RD after tax | PPF (tax-free) |
|---|---|---|---|
| 10 | ₹21.9 lakh | ₹15.4 lakh | Not available |
| 15 | ₹46.4 lakh | ₹26.5 lakh | ₹32.6 lakh |
At the 30% slab, tax cuts the RD gain by almost a third. PPF's tax-free status makes it more competitive than its 7.1% headline rate suggests.
What if equity returns are lower?
The SIP result depends heavily on the return you assume. Over 15 years, for ₹10,000 a month:
| Equity return | Before tax | After tax (long-term gains) |
|---|---|---|
| 8% | ₹34.8 lakh | ₹32.8 lakh |
| 10% | ₹41.8 lakh | ₹38.9 lakh |
| 12% | ₹50.5 lakh | ₹46.4 lakh |
At 8%, the SIP ends at about ₹32.8 lakh after tax, almost the same as PPF's ₹32.6 lakh, but with far more risk along the way. Equity needs to earn clearly more than about 8% a year to be worth the ups and downs compared with PPF. You can test this with the SIP Calculator and the PPF Calculator.
Lump sums: FD vs a mutual fund
If you have ₹10 lakh to invest for 10 years:
| Option | Estimated value |
|---|---|
| FD at 7% (quarterly compounding) | ₹20.0 lakh |
| Mutual fund lumpsum at 12% (assumption) | ₹31.1 lakh |
The FD's result is predictable. The mutual fund's is uncertain and could be higher or lower. Use the FD Calculator and the Lumpsum Calculator.
Risk, liquidity and lock-in
| Feature | SIP | FD | RD | PPF |
|---|---|---|---|---|
| Can I withdraw anytime? | Yes (most funds) | Yes, with a penalty | Yes, with a penalty | Only partly, after the early years |
| Can the value fall? | Yes | No | No | No |
| Is the return fixed? | No | Yes | Yes | Rate changes quarterly |
| Beats inflation? | Often over long periods | Often barely, after tax | Often barely, after tax | Usually modestly |
Inflation matters. If your FD earns 7%, you pay 30% tax and inflation is 5%, your real return is about zero. See FD returns after tax and inflation and how inflation works.
Which should you choose?
Match the tool to the goal:
- Under 3 years: FD, RD or a liquid fund. You cannot afford a market fall.
- 3 to 7 years: a mix of safe options and equity, moving to safe money as the goal gets close.
- 7 years or more: a SIP can make sense for the growth portion if you can stay invested through falls.
- Safe, tax-free retirement money: PPF, EPF and the other options in NSC vs PPF vs FD.
- Most people: a combination. See the best way to invest ₹10,000 a month.
Common mistakes
- Comparing headline rates only. Compare after tax.
- Using FDs for a 20-year goal. After tax and inflation, growth is minimal.
- Putting an emergency fund in equity. Keep it safe and easy to reach.
- Expecting equity to be smooth. A SIP can show losses for a year or more.
- Investing in PPF without needing the money locked. Its 15-year lock-in suits long-term goals.
Frequently asked questions
Which is better, SIP or FD?
It depends on your time horizon and risk. For long goals SIPs have more growth potential. For short goals, an FD is safer.
Is PPF better than FD?
PPF has tax-free interest and a government backing, but a 15-year lock-in. At higher tax slabs, PPF's after-tax return can beat an FD's.
Can I invest in all four?
Yes. Many people use SIP for growth, PPF for safe long-term money, and RD or FD for near-term goals.
Is an RD better than a SIP?
An RD gives certainty, and a SIP gives potential growth with risk. They suit different goals.
How do I choose between them for a child's education?
Use the time left. Equity for goals more than 7 years away and safe options as the date approaches. See planning your child's education fund.
These examples use assumed returns and are for illustration. Mutual fund returns are not guaranteed, and rates for FD and RD vary by bank. This is not personal investment advice.
Try the PPF Calculator