When it comes to long-term financial planning, choosing the right investment option is crucial. Among the most popular options for Indian investors are the Systematic Investment Plan (SIP) and the Public Provident Fund (PPF)—each offering distinct benefits, risk profiles, and return potential. While SIPs are market-linked and known for their potential to generate high returns, PPF is a government-backed scheme preferred for its safety and steady interest. Let’s have a look on the features of both:
SIP vs PPF: Comparison
| Feature | SIP (Systematic Investment Plan) | PPF (Public Provident Fund) |
| Investment Type | Market-linked (Mutual Funds) | Government-backed savings scheme |
| Risk Level | Moderate to High (depends on fund type) | Very Low (virtually risk-free) |
| Returns | Market-based (Approx. 12–15%, may vary depending upon market situations) | Fixed (7.10% currently, reviewed quarterly) |
| Lock-in Period | No lock-in (except ELSS funds: 3 years) | 15 years (can be extended in blocks of 5 years) |
| Liquidity | High (can redeem anytime in open-ended funds) | Limited (partial withdrawal allowed after 6th year) |
| Minimum Investment | Rs 500/month (varies by fund) | Rs 500/year |
| Maximum Investment | No upper limit | Rs 1.5 lakh/year |
| Tax Benefit on Investment | Up to Rs 1.5 lakh under Section 80C (only ELSS funds) | Up to Rs 1.5 lakh under Section 80C |
| Tax on Returns | Taxed (LTCG above Rs 1.25 lakh per year at 12.5%) | Fully Tax-Free |
| Who Should Invest | Investors seeking high returns and can take risks | Conservative investors looking for safe growth |
To understand how these two options perform over time, we examine a scenario where an investor puts Rs 90,000 annually into each scheme over 15 years.
SIP (Systematic Investment Plan)
A SIP involves investing a fixed amount regularly in mutual funds. For this comparison, an investment of Rs 7,500 per month (Rs 90,000 annually) was considered over a 15-year period, with an assumed average annual return rate of 12%, which is typical for equity mutual funds over the long term.
- Monthly SIP Amount: Rs 7,500
- Annual Investment: Rs 90,000
- Total Investment (15 years): Rs 13,50,000
- Expected Rate of Return: 12% p.a.
- Estimated Returns: Rs 22,19,485
- Total Corpus After 15 Years: Rs 35,69,485
PPF (Public Provident Fund)
PPF is a government-backed, long-term savings scheme with fixed interest rates, providing safety and tax benefits. The current interest rate used in this calculation is 7.10% per annum.
- Annual Investment: Rs 90,000
- Total Investment (15 years): Rs 13,50,000
- Interest Rate: 7.10% p.a. (compounded annually)
- Total Interest Earned: Rs 10,90,926
- Total Corpus After 15 Years: Rs 24,40,926
Also Read: 8 Best Alternatives to Fixed Deposits in India
Over a 15-year period, an annual investment of Rs 90,000 through a SIP, assuming a 12% annual return (subject to market risks) —resulted in a corpus of Rs 35.69 lakh.
The yearly Rs 90,000 investment in a PPF account, with a fixed interest rate of 7.1% per annum, accumulated to Rs 24.40 lakh.
The difference in corpus reflects the variation in how each instrument calculates and accumulates returns—SIP being market-linked and subject to fluctuations, while PPF offers fixed returns declared by the government. SIP returns may vary depending on market performance, whereas PPF returns remain stable throughout the investment period.
Final Thoughts
Over a 15-year investment horizon, both SIP and PPF offer distinct advantages depending on an individual’s financial goals and risk appetite. While SIPs have the potential to deliver higher returns through market participation, PPF provides assured returns with capital protection. Investors may consider their risk tolerance, liquidity needs, and long-term objectives when choosing between the two.
Disclaimer: The information provided in this article is for educational and informational purposes only. It does not constitute financial advice or a recommendation to invest in any specific financial product. Returns mentioned are based on assumed rate and are not guaranteed. Investors are advised to assess their financial situation, risk tolerance, and consult a certified financial advisor before making any investment decisions.
