Which is better- PPF vs SIP?


A Systematic Investment Plan (SIP) is a method of investing in mutual funds, whereas a Public Provident Fund (PPF) is a traditional savings scheme introduced by the Government of India. The following table illustrates the difference between the two, so as to decide which one is better:





Systematic Investment Plan (SIP)



Public Provident Fund (PPF)



Investment in mutual funds through SIP is ideal for all, short, medium and long term.



Investment in PPF is ideal for long term (15 years or more).




Since SIP is a way of investment in mutual funds, the returns from it also depend upon the performance of mutual funds.



The returns are fixed at the time of account opening. the rate of interest is decided by the Government of India each year.



Minimum Investment


Can be as low as Rs.100; depends upon the mutual fund in which the individual is investing



Rs. 500


Maximum Investment



No limit


Rs. 1,50,000 per annum




It attracts both short term and long-term capital gains tax, tax saving can be done by investing in ELSS.



It falls in Exempt-Exempt-Exempt category, on investment of up to Rs. 1,50,000 per year, i.e., no tax has to be paid.


Lock-in period



No minimum lock-in period except in the case of ELSS, in which the lock-in period is 3 years.



Lock-in period is 15 years.





Since returns are linked to markets, they carry some risk.



It is a very safe investment option.


Therefore, which option among PPF and SIP is better depending upon the risk profile, returns and the flexibility desired etc. by the individual. PPF wins in case of tax saving and long term, risk-free wealth accumulation. However, investment in mutual funds through SIP wins in case of higher returns linked to the market and flexibility in terms of the lock-in period requirements.


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