PPF vs SIP, Know which investment can make you rich soon

PPF vs SIP– If you are thinking of investing for a long time, then mutual funds and PPF (Public Provident Fund) can be the best option for you. While mutual funds are linked to market returns, PPF is a good option for safe and fixed returns.

While choosing one of these two, it is important to understand your investment period, financial goals and risk. Although there is a difference in the structure, returns, taxation and investment period of both, both can prove to be good for increasing wealth in the long term.

PPF vs Mutual Funds SIPs

PPF is a government scheme that offers safe and stable returns. On the other hand, SIPs (Systematic Investment Plans) of mutual funds can offer higher returns than PPF, but they are affected by market fluctuations. There is a lock-in period of 15 years on investing in PPF, which means you cannot withdraw your money for 15 years. Whereas in mutual funds, you have to take a long-term view, as there is market risk. However, investing in mutual funds through SIPs is easy. SIPs give you a way to invest in mutual funds, allowing you to invest your money in different debt and equity instruments, without being directly connected to the market.

While PPF is completely tax-free, profits earned from mutual funds are taxable. Long-term and short-term capital gains tax can be levied on it, as prescribed in the Income Tax Act 1961. Investing in PPF gives you tax deduction under Section 80C, making it an attractive investment option. You can invest from Rs 500 to Rs 1.5 lakh in PPF in a year and its current return is 7.1% per annum. On the other hand, there is no limit on investment in mutual funds and its returns can change according to the market conditions.

Rs 1.5 lakh per annum for 15 years: Investment comparison

If you wish to invest Rs 1.5 lakh every year for 15 years, let’s see which option between PPF and Mutual Fund SIPs can give you higher returns: –

PPF Calculation (Public Provident Fund):

Duration: 15 years

Amount: Rs 1.5 lakh per year

Return: 7.1% per annum (subject to change by the government)

Total investment: Rs 22.5 lakh (Rs 1.5 lakh per year × 15 years)

Interest: Rs 16.95 lakh

Final amount (corpus): Rs 39.45 lakh

Mutual Funds (Mutual Funds SIPs):

Duration: 15 years

Amount: Rs 1.5 lakh per year

Returns: 12% p.a. (assume)

Total investment: Rs 22.5 lakh

Return: Rs 36.99 lakh

Final amount (corpus): Rs 59.49 lakh.

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