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If you want to keep your money absolutely safe and prefer to avoid the volatility of the stock market, there are still ways for you to earn returns. Bank Fixed Deposits (FDs) and various government schemes offer opportunities for secure and rewarding investments.

However, when it comes to investing, the common dilemma is whether to choose FDs or government schemes. Both are evergreen and safe options for parking your money; the main difference lies in their interest rates. Let us examine which option—FDs or government schemes—yields higher returns.

Which offers higher returns?
Returns are usually the priority. While the government has not altered interest rates for small savings schemes this quarter, these schemes still offer better rates compared to banks.

Sukanya Samriddhi Yojana (SSY): Highest interest at 8.2%.
National Savings Certificate (NSC): 7.7% interest.
Kisan Vikas Patra (KVP): 7.5% interest.
Monthly Income Scheme (MIS): 7.4% interest.
Public Provident Fund (PPF): 7.1% interest.
Post Office Savings Deposit: 4% interest.

Regarding FDs, interest rates vary across different banks. While Small Finance Banks may offer rates exceeding 8%, they come with higher risk; in contrast, public and private sector banks typically offer rates in the 6–7% range. Here is a look at some banks:

SBI, HDFC, and ICICI Bank: Around 6.25% interest.
Kotak Mahindra Bank: Approximately 6.50% interest.
Yes Bank: Around 6.66% interest.
These bank interest rates fluctuate over time. Investors choose varying tenures for FDs, ranging from one year to three, five, or even ten years. 

Which has a longer lock-in period?
Government Schemes: While these offer higher interest rates, funds remain locked for a long duration. For instance, the PPF has a 15-year lock-in period, and the NSC has a 5-year one; thus, they are suitable for long-term goals. Although partial withdrawals are possible before maturity, the interest earned is lower than what is received upon the scheme's full maturity.

Bank FDs: FDs offer complete flexibility regarding tenure. You can choose a term ranging from 7 days to 10 years. FDs are a better option if you wish to park your money for the short or medium term.

How much can you invest?
The minimum investment amount for government schemes is quite low. For example, in PPF, you can invest as little as ₹500 annually, with a maximum limit of ₹1.5 lakh per year. Similarly, investment limits for FDs vary by bank; you might be able to invest ₹10,000 at one bank and ₹5 lakh at another.

Where is the tax burden higher?
Government Schemes: Returns from PPF are tax-free, and investments in schemes like NSC qualify for a deduction of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Additionally, interest earned on post office deposits offers relief of up to ₹10,000 under Section 80TTA.

Bank FDs: Interest earned on standard bank FDs is fully taxable. Tax is deducted on this interest based on your applicable income tax slab.

Understanding through calculation
Example 1: Suppose you invest ₹1 lakh in an FD for 3 years at an interest rate of 6.5%. After 3 years, your investment would yield an interest gain of ₹23,144. In other words, when you withdraw the money after three years, your ₹1 lakh will have grown to ₹1,23,144; however, you will be liable to pay a certain amount of tax upon withdrawal.

Example 2: If you invest in a PPF account for 15 years, depositing ₹10,000 annually, then—based on an interest rate of 7.1%—you will earn ₹1,21,214 in interest. Consequently, the ₹1,50,000 you invested over the 15 years will grow to ₹2,71,214. Furthermore, since PPF investments are exempt from taxation, the...