PPF vs FD: where should surplus cash go?

Different jobs, not the same product

A Public Provident Fund account compounds at the government-notified rate and is meant for a long stretch: 15 years, with limited early withdrawal and loan windows. Interest and maturity are tax-free for a resident individual under the usual EEE treatment when the account is used as intended. A fixed deposit is a bank (or post-office) contract for a tenure you choose. You can break many FDs early for a penalty, and the interest is added to your income and taxed at your slab.

So the first cut is simple. Money you may need in one to three years, or that must stay liquid for an emergency, belongs in an FD or a savings/liquid parking spot—not in PPF. Money you will not touch until a distant goal can use PPF's lock-in as a feature.

Tax and 80C change the after-tax picture

In the old tax regime, PPF contributions still sit inside the section 80C cap of ₹1.5 lakh for Tax Year 2026-27. FD interest does not get that shelter; it is taxable each year (with TDS rules depending on the payer and thresholds). In the new regime you lose 80C, so the PPF contribution no longer cuts this year's tax bill—but the interest can still stay tax-free at maturity. An FD's interest remains taxable in both regimes.

If old-regime 80C room is already full with EPF, ELSS or insurance, the incremental PPF contribution is mainly about the goal and the tax-free compounding, not an extra deduction.

Run the same surplus through both tools

Take the amount you can spare each year (PPF allows up to ₹1.5 lakh per financial year) and the same end date. The PPF calculator projects the notified-rate path over 15 years; the FD calculator shows a bank rate for the tenure you pick. Compare after tax in your head: FD interest at your slab versus PPF's tax-free corpus. Neither tool files your return or picks a bank for you.