SIP, RD, PPF and FD compared: how each one grows your money
Four popular ways to save in India, how the maths of each works, and worked examples you can reproduce with the calculators. No predictions, just arithmetic.
Ask five people how to save money in India and you will hear SIP, RD, PPF, FD and a few others. They sound similar, but each one grows your money in a different way, with different rules about how much you can put in, how long it is locked and how the result is taxed. This post does not tell you which to pick, because that depends on your goals and risk tolerance. It shows how the arithmetic of each works, with numbers you can reproduce yourself.
Illustrations, not advice or predictions. The rates below are assumptions chosen to demonstrate the maths. Real interest rates change, and market-linked investments can lose money. For personal advice, talk to a qualified financial adviser.
Fixed deposit (FD): one lump sum, a fixed rate
You deposit a sum for a fixed period at a rate agreed on day one. Indian banks usually compound FD interest quarterly. ₹1,00,000 at 7% for 5 years grows to about ₹1,41,478 with quarterly compounding, against ₹1,35,000 if the interest were simple (not compounded). That extra ₹6,478 is compounding at work, and it is why the interest calculator shows simple and compound side by side.
- Returns: fixed and known in advance.
- Tax: interest is added to your income and taxed at your slab rate, and banks may deduct TDS.
Recurring deposit (RD): a fixed amount every month
An RD works like a series of small FDs. You pay the same amount each month, and each instalment earns interest from the day it is paid. ₹5,000 a month for 3 years at 6.5%, compounded quarterly, means ₹1,80,000 deposited and about ₹1,99,122 at maturity, or roughly ₹19,122 of interest. Use the RD calculator to try other amounts and terms.
- Good for: people who save from a monthly salary and want a predictable result.
- Remember: the average rupee is invested for less time than in an FD, so the total interest is lower than an FD of the same total amount.
Public Provident Fund (PPF): long term, government-backed
A PPF account matures after 15 years and accepts ₹500 to ₹1,50,000 a year. The rate is set by the government every quarter. If you deposit the maximum ₹1,50,000 each year at 7.1% for 15 years, you deposit ₹22.5 lakh and end up with about ₹40.68 lakh, assuming the rate never changes. The PPF calculator lets you try other rates and see the effect of extending the account in five-year blocks.
- Returns: not guaranteed in advance, since the rate is reset, but historically steady.
- Tax: under current rules the interest and the maturity amount are tax-free. Check the latest rules, as tax laws change.
- Trade-off: the long lock-in means it is not for money you may need soon.
SIP: regular investing in mutual funds
A systematic investment plan (SIP) invests a fixed amount in a mutual fund every month. Unlike the three above, the value goes up and down with the market, and no return is promised. The calculator uses an assumed steady rate purely to show the effect of regular investing over time:
| Assumed yearly return | Invested (₹10,000 × 15 years) | Value after 15 years |
|---|---|---|
| 8% | ₹18,00,000 | ≈ ₹34,83,000 |
| 12% | ₹18,00,000 | ≈ ₹50,46,000 |
| 15% | ₹18,00,000 | ≈ ₹67,69,000 |
The same ₹10,000 a month produces very different outcomes depending on the return, and real markets do not deliver a smooth rate. Try your own numbers, with a cautious rate included, in the SIP calculator. It also has a lumpsum option and a yearly step-up for people whose income grows.
- Returns: variable and not guaranteed. You can lose money, particularly over short periods.
- Tax: gains on equity mutual funds are taxed as capital gains, and the rates have changed over the years, so check the current rules.
Comparing them fairly
To compare investments that run for different times, convert each to a single yearly growth rate. That is what CAGR does. If ₹1,00,000 becomes ₹2,50,000 in 8 years, the CAGR is about 12.1% a year. The CAGR calculator will find it for any start value, end value and period. Do not forget inflation, which quietly shrinks what money can buy. At 6% inflation, ₹1 lakh today buys what only about ₹42,000 would buy after 15 years, which the inflation calculator shows.
| FD | RD | PPF | SIP | |
|---|---|---|---|---|
| How you pay | One lump sum | Monthly | Yearly, up to ₹1.5 lakh | Monthly |
| Return | Fixed | Fixed | Set quarterly by government | Market-linked |
| Lock-in | Chosen term | Chosen term | 15 years | None for most funds |
| Risk of loss | Very low | Very low | Very low | Real |
A sensible first step before choosing is to write down what the money is for and when you need it. A goal that is two years away and one that is twenty years away call for very different choices.