PPF vs SIP: Many Indian investors face the same dilemma every year: where should the ₹1.5 lakh allowed under tax-saving investments be put to build long-term wealth? Two of the most popular options are Public Provident Fund (PPF) and Systematic Investment Plans (SIPs) through mutual funds.
Both choices have their own advantages. PPF is known for safety and guaranteed returns, while SIPs are preferred for higher growth potential through market-linked investments. But when the investment horizon is long, such as 15 years, the real question becomes simple: which option builds a bigger corpus?
To answer this clearly, we’ll compare PPF and SIP using the same annual investment of ₹1.5 lakh over 15 years and walk through the full calculation step by step.
Basics of PPF Investment
PPF is a government-backed savings scheme with a fixed tenure of 15 years. It offers tax benefits under Section 80C, tax-free interest, and full capital protection. The interest rate is declared periodically by the government and is currently assumed at around 7.1 percent per year for this calculation.
In PPF, investors can deposit a minimum of ₹500 and a maximum of ₹1.5 lakh per year. Interest is compounded annually, and the maturity amount is completely tax-free.
For conservative investors, PPF offers peace of mind, but the trade-off is relatively moderate returns compared to market-linked options.
Basics of SIP Investment
A SIP allows investors to put money regularly into equity mutual funds. Unlike PPF, SIP returns are not guaranteed and depend on market performance. However, over long periods, equity markets have historically delivered higher returns.
For this comparison, we assume an average annual return of 12 percent from SIP investments, which is a realistic long-term expectation for diversified equity mutual funds.
SIP investments also qualify for tax benefits if made through ELSS funds, but here we focus purely on wealth creation, not tax treatment.
Investment Assumptions for Fair Comparison
To keep the comparison simple and fair, we will use the following assumptions:
Annual investment: ₹1.5 lakh
Investment period: 15 years
Total invested amount: ₹22.5 lakh
PPF assumed return: 7.1 percent per year
SIP assumed return: 12 percent per year
All investments are made at the end of each year.
PPF Calculation for 15 Years
When you invest ₹1.5 lakh every year in PPF for 15 years at an average interest rate of 7.1 percent, the power of compounding works steadily but slowly.
Total investment over 15 years comes to:
₹1.5 lakh × 15 = ₹22.5 lakh
Using standard PPF maturity calculations, the final corpus after 15 years would be approximately:
Maturity amount from PPF: around ₹40–41 lakh
Out of this amount:
Total investment: ₹22.5 lakh
Total interest earned: around ₹18–19 lakh
The biggest advantage here is certainty. The returns are stable, predictable, and completely tax-free, making PPF ideal for risk-averse investors.
SIP Calculation for 15 Years
Now let’s look at the SIP scenario. Investing ₹1.5 lakh per year into equity mutual funds with an average return of 12 percent leads to a much stronger compounding effect.
Total investment remains the same:
₹22.5 lakh over 15 years
Using future value calculations for annual investments, the estimated corpus after 15 years would be approximately:
Final SIP corpus: around ₹60–62 lakh
Breakdown:
Total investment: ₹22.5 lakh
Total gains: around ₹38–40 lakh
This shows how higher returns significantly magnify wealth over long periods, even when the invested amount stays the same.
PPF vs SIP: Side-by-Side Comparison
When we compare both options over 15 years, the difference becomes very clear.
PPF final corpus: around ₹40–41 lakh
SIP final corpus: around ₹60–62 lakh
The SIP route builds nearly ₹20 lakh more wealth than PPF over the same investment period. This difference exists mainly due to higher expected returns from equity markets.
However, this extra return comes with volatility. SIP values may fluctuate during market ups and downs, while PPF grows steadily without shocks.
Risk, Safety, and Investor Psychology
PPF offers capital protection and guaranteed returns backed by the government. There is no market risk, no volatility, and no stress during economic downturns. This makes it suitable for investors who prioritize safety over growth.
SIP investments, on the other hand, demand patience and emotional discipline. Markets may fall sharply in some years, and short-term losses are possible. But investors who stay invested for 15 years or more usually benefit from long-term market growth.
Your risk tolerance plays a major role in deciding between the two.
Tax Considerations to Keep in Mind
PPF enjoys an EEE status, meaning investment, interest, and maturity amount are all tax-free. This makes its effective return quite attractive for conservative investors.
SIP investments in equity funds attract capital gains tax. Long-term capital gains above a certain limit are taxable. Even after tax, however, SIPs generally deliver higher post-tax returns than PPF over long periods.
Tax impact slightly reduces SIP gains but does not eliminate the advantage of higher compounding.
Which Option Builds a Bigger Corpus?
Purely in terms of corpus size after 15 years, SIP clearly wins. With the same ₹1.5 lakh annual investment, SIP builds significantly more wealth due to higher expected returns.
PPF, while reliable and safe, cannot match equity-based growth over long durations.
The right choice depends on your financial goals. If wealth creation and beating inflation are priorities, SIP is more suitable. If safety, stability, and guaranteed returns matter more, PPF is the better option.
Final Verdict
Investing ₹1.5 lakh per year for 15 years is a powerful financial decision, regardless of the instrument. But the difference lies in how much patience and risk you are willing to accept.
PPF offers stability and peace of mind with a respectable corpus. SIP offers higher growth and the potential to build a much larger corpus, provided you stay invested through market cycles.
For many investors, a balanced approach using both PPF and SIP can also work well, combining safety with growth.