Bank FDs vs. Small Savings Schemes: Which One Holds the Edge? Check the Complete List Here Before Investing..
Small savings schemes—such as the Public Provident Fund (PPF), National Savings Certificate (NSC), Kisan Vikas Patra (KVP), Sukanya Samriddhi Yojana (SSS), and Senior Citizens Savings Scheme (SCSS)—along with Bank Fixed Deposits (FDs), rank among the preferred investment and financial instruments for investors who prioritize safety. This is because these options allow investors to earn fixed returns and claim deductions on income tax.
Most of these schemes offer interest at an annual rate ranging from 4% to 8.2%. Notably, for the April-June quarter of this year, the government has kept the interest rates for small savings schemes unchanged for the eighth consecutive time. Whether you decide to invest in a Fixed Deposit or a small savings scheme, each comes with its own distinct advantages. Let us compare FDs and small savings schemes in detail…
FDs vs. Small Savings Schemes
Interest Rate: For most investors, the higher the rate of return, the more attractive the investment option becomes (though, naturally, factors such as risk and tenure are also taken into consideration). As of April 2026, most banks are offering annual FD interest rates ranging from 6.25% to 6.66%. In comparison, various small savings schemes offer interest rates within the range of 4% to 8.2%.
Small Savings Schemes | Interest Rate (in %)
Sukanya Samriddhi Yojana | 8.2
Public Provident Fund | 7.1
Post Office Savings Deposit | 4
Kisan Vikas Patra | 7.5
National Savings Certificate | 7.7
Monthly Income Scheme | 7.4
Bank FDs | Returns (in %)
State Bank of India | 6.25
Kotak Mahindra Bank | 6.50
HDFC Bank | 6.25
Yes Bank | 6.66
ICICI Bank | 6.25
Lock-in Period: Although Small Savings Schemes offer higher interest rates compared to Fixed Deposits, they typically come with a lock-in period. The NSC has a lock-in period of five years, while the PPF has a lock-in period of 15 years.
Tax Benefits: Another significant factor is the tax benefit. Here, interest earned on FDs is taxed according to the applicable income tax slab rate, whereas the interest earned on Small Savings Schemes is tax-free up to ₹1.5 lakh under Section 80C of the Income Tax Act, or up to ₹10,000 under Section 80TTA of the I-T Act (whichever is applicable).
Can you choose more than one option?
Yes, you can choose more than one option for investment. In fact, experts recommend structuring your portfolio to include a mix of various investment options, including both FDs and Small Savings Schemes. Generally, investments made in these schemes (PPF/NSC and FDs) cater to the portion of the portfolio allocated to debt investments. Therefore, both these investment avenues serve the same objective.
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