SIP vs PPF: An investment can go a long way in helping the investor achieve their long-term financial goals. Many investors flock to asset classes such as mutual fund SIPs and Public Provident Fund (PPF) to park their savings. However, both are different in many aspects, including returns and associated risks. In this article, let’s discuss the pros and cons of investing, for instance, a sum of Rs 1.45 lakh a year in both avenues, and compare the possible outcome in each case.
What is an SIP?
SIP in mutual funds is a market-linked investment option in which investors can invest their money based on their financial capacity. It offers an average long-term return of 12 per cent and people can invest monthly, quarterly, or yearly.
What is a PPF?
PPF or Public Provident Fund is a government-backed long-term savings scheme in which one can invest up to Rs 1.5 lakh per year. This scheme offers an interest rate of 7.1 per cent. The maturity period is 15 years.
Here are some of the main differences between mutual fund SIPs and PPFs:
| Factor | SIP | PPF |
| Risk | High risk | Low risk |
| Lock-in | No lock-in, investor gets to choose | 15 years |
| Liquidity | High | Low |
| Tax implications | 12.5% tax applicable on LTCG for gains exceeding Rs 1.25 lakh and 20% tax applicable on STCG | Applicable for tax exemption under Section 80C |
SIP vs PPF: How Much Corpus You Can Generate in 15 Years?
Can you guess how much corpus you can generate in both – SIP and PPF – in 15 years with a Rs 1,45,000 annual investment? Let’s find out:
SIP Investment Calculation: How Much Corpus Will You Generate in 15 Years with Rs 1,45,000 Annually?
If you invest Rs 1,45,000 yearly in SIP (Rs 12,083 per month), your total investment will amount to Rs 21,74,940 in 15 years. Assuming an average annual return of 12 per cent, the total corpus generated at the end of 15 years would be approximately Rs 81,78,537, including Rs 60,03,597 as capital gains.
SIP Returns (with 12% annual interest rate):
- Monthly investment: Rs 12,083
- Total investment (15 years): Rs 21,74,940
- Estimated returns: Rs 60,03,597
- Total value: Rs 81,78,537
PPF Investment Calculation: How Much Will Your Corpus Grow in 15 Years with Rs 1,45,000 Annually?
If you invest Rs 1,45,000 per year in a PPF, your total investment over 15 years will also amount to Rs 21,75,000. However, with an annualised return of 7.1 per cent, the interest earned would be Rs 17,57,602. With this, the final corpus would be around Rs 39,32,602 (principal + interest).
PPF Returns (with 7.1% annual interest rate):
- Annual Investment: Rs 1,45,000
- Total Investment (15 years): Rs 21,75,000
- Estimated Returns: Rs 17,57,602
- Total Corpus: Rs 39,32,602
