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Investment Comparison 2026: PPF at 7.1% or Mutual Funds at 15% – Where to Invest?

Vikram Singh
By Vikram Singh
3 min read
Published: 27 Feb 2026
Investment Comparison 2026: PPF at 7.1% or Mutual Funds at 15% – Where to Invest?
Investment Comparison 2026: The new financial year is about to begin, and every Indian investor has one question on their mind: should they invest their hard-earned money in the “safe” Public Provident Fund (PPF) or the “fast-growing” mutual funds? Given the economic conditions of 2026, where beating inflation is a major challenge, simply saving taxes isn’t enough.
Now is the time for a strategy that not only saves your money but also grows it rapidly. In this article, we will compare the returns, taxes, and risks of PPF and mutual funds based on the latest data for 2026, so you can make the right decision for your future.

Public Provident Fund

PPF has always been the preferred choice for investors who want to stay risk-averse. For the first quarter of 2026 (January-March), the government has maintained the PPF interest rate at 7.1%. Its biggest highlight is its EEE (Exempt-Exempt-Exempt) status, which means the investment amount, interest earned, and maturity proceeds are completely tax-free.
Public Provident Fund Calculator
Public Provident Fund Calculator
PPF is government guaranteed, so there’s zero risk of loss. However, its biggest limitation is its long lock-in period of 15 years. Although partial withdrawal rules have been relaxed after Budget 2026, it’s still ideal for those looking to build a safety net for long-term goals like retirement or their children’s marriage.

Mutual Funds

If we look at market performance as of 2026, good equity mutual funds have delivered an average annualized return (CAGR) of 12% to 18% over the past 5 to 10 years. This return is significantly higher than that of PPF, but it also carries market risk.
The biggest strength of mutual funds is their liquidity, meaning the freedom to withdraw funds. Except for tax-saving funds (ELSS), you can withdraw money from open-ended funds at any time. On the tax front, according to the 2024 Budget rules, long-term capital gains (LTCG) exceeding ₹1.25 lakh are taxed at 12.5%. Despite paying taxes, the net returns of mutual funds often significantly outperform PPF over the long term.

What are the key differences

Mutual Funds
Mutual Funds
Understanding the differences between these two investment options is crucial for your portfolio. While PPF is a fixed-income instrument, mutual funds are more dependent on market movements. You can deposit a maximum of ₹1.5 lakh in PPF in a financial year, while there is no upper limit on investment in mutual funds.
PPF interest may fluctuate quarterly, but it generally remains stable.
In contrast, mutual funds invest your money in stock market companies, increasing the likelihood of inflation-beating returns. PPF is for those who want a peaceful night’s sleep, while mutual funds are for those who want to see their wealth grow rapidly.

Where to invest in 2026?

Experts believe that a balanced portfolio in 2026 is one that combines both safety and growth. If you are young and your goals are 10-20 years away, you should invest 70% of your savings in mutual funds and 30% in PPF.
Use PPF as a tax-saving (Section 80C) and a safe emergency fund. For wealth creation, starting a SIP in mutual funds is the wisest move. Remember, PPF will never make you poor, but mutual funds are the only path that can truly make you rich.
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