In the world of long-term investment, two names often stand out in India — SIP (Systematic Investment Plan) and PPF (Public Provident Fund). Both are popular choices among Indian investors who want to build wealth over time. But if you start investing ₹10,000 every month, where will you get better returns — in SIP or PPF?
Let’s break this down in simple terms and analyse both options based on key factors like returns, safety, risk, liquidity, taxation, and long-term wealth creation.
Understanding SIP and PPF: Basics First
What is SIP?
SIP is a method of investing a fixed amount in mutual funds regularly, usually every month. It allows you to benefit from compounding and rupee-cost averaging over time. SIPs mostly invest in equity mutual funds (though there are debt SIPs too), and are considered ideal for long-term wealth generation.
What is PPF?
PPF is a government-backed savings scheme introduced for individuals to save money for long-term goals. It offers fixed returns declared every quarter by the Ministry of Finance and comes with tax benefits under Section 80C of the Income Tax Act.
Investment Assumptions: ₹10,000 Every Month for 15 Years
Let’s say you invest ₹10,000 every month consistently for 15 years in both SIP and PPF. That’s a total investment of ₹18 lakh (₹10,000 x 12 months x 15 years). Now let’s see how both investments perform under different conditions.
Returns Comparison: Which Grows Your Money More?
SIP Returns (Assuming Average 12% Annual Return)
Equity mutual funds have historically given average annual returns of 10–15%. For our calculation, we assume 12%, which is a reasonable long-term average for equity funds.
- Investment Duration: 15 Years
- Monthly SIP Amount: ₹10,000
- Expected Annual Return: 12%
Using a SIP calculator:
- Total Invested: ₹18,00,000
- Wealth Gained: ₹25,23,000 (approx.)
- Maturity Amount: ₹43,23,000
That’s more than 2.4 times your investment.
PPF Returns (Assuming 7.1% Annual Interest)
PPF interest is set by the government and currently (as of April 2025), the interest rate is 7.1% per annum. This rate has been stable for the last few years, though it can vary slightly.
- Investment Duration: 15 Years
- Monthly Investment: ₹10,000
- Interest Rate: 7.1%
Using the PPF calculator:
- Total Invested: ₹18,00,000
- Wealth Gained: ₹10,35,000 (approx.)
- Maturity Amount: ₹28,35,000
This is about 1.57 times your investment.
Verdict on Returns:
Clearly, SIP in equity mutual funds outperforms PPF over the long term. ₹10,000 monthly in SIP can fetch you ₹43.23 lakh, while PPF gives around ₹28.35 lakh.
Risk Factor: Which Is Safer?
SIP Risk:
SIP invests in market-linked instruments, so returns are not guaranteed. Market volatility affects the short-term value, but long-term performance smooths out the ups and downs.
- Equity SIPs carry moderate to high risk.
- Debt SIPs carry low to moderate risk.
Still, if you’re investing for more than 10–15 years, equity SIPs tend to recover from downturns and give good returns.
PPF Risk:
PPF is risk-free, backed by the Government of India. Your money is completely safe, and the returns are guaranteed.
- Ideal for conservative investors
- No market linkage, hence no volatility
Verdict on Risk:
If safety is your top priority, PPF wins hands down. But for wealth creation and higher returns, SIP is worth the risk if held for the long term.
Liquidity: Which One Is More Flexible?
SIP Liquidity:
- SIPs can be withdrawn anytime (except for lock-in mutual funds like ELSS).
- You can stop SIPs anytime without penalties.
- Partial or full withdrawals are allowed.
This makes SIPs very liquid and flexible for investors.
PPF Liquidity:
- PPF has a 15-year lock-in.
- Partial withdrawals allowed only from 7th year onwards.
- Loans available from the 3rd year, but with restrictions.
- Full premature closure allowed only for specific reasons (like medical emergencies or higher education).
Verdict on Liquidity:
SIP offers much better liquidity. PPF is suitable only if you can lock in your money for 15 years.
Tax Benefits: What About Tax Saving?
SIP Taxation:
- SIPs in equity mutual funds are not tax-free.
- Returns are subject to Capital Gains Tax.
- Long-Term Capital Gains (LTCG): 10% tax on gains above ₹1 lakh per year (after 1 year).
- Short-Term Capital Gains (STCG): 15% if redeemed before 1 year.
No tax deductions under Section 80C (unless SIP is in ELSS mutual funds).
PPF Taxation:
- PPF falls under EEE category (Exempt-Exempt-Exempt).
- Contribution up to ₹1.5 lakh per year is eligible for deduction under Section 80C.
- Interest earned is tax-free.
- Maturity amount is also fully tax-free.
Verdict on Taxation:
PPF clearly wins here. It’s one of the few investment options in India that is completely tax-free at all stages.
Ideal Investor Profile: Who Should Choose What?
SIP Is Ideal For:
- Young investors with long-term financial goals (like retirement, house purchase, child education).
- People who can take moderate risk for better growth.
- Investors who want liquidity and flexibility.
- Those with a 10–15 year investment horizon.
PPF Is Ideal For:
- Risk-averse investors.
- People who want guaranteed and tax-free returns.
- Those looking for long-term tax-saving options.
- Ideal for retirement corpus, especially for self-employed and private-sector employees.
Real-Life Scenario: ₹10,000 Monthly for 15 Years in SIP vs PPF
Let’s look at side-by-side numbers for easier understanding:
| Investment | Total Amount Invested | Estimated Return (%) | Maturity Value (₹) | Risk | Tax on Returns |
| SIP | ₹18,00,000 | 12% | ₹43,23,000 | Moderate | Yes (LTCG > ₹1L) |
| PPF | ₹18,00,000 | 7.1% | ₹28,35,000 | Zero | No |
SIP vs PPF: Final Take on ₹10K Monthly Investment
Both SIP and PPF have their pros and cons. If you want higher returns and are comfortable with some market risk, SIP is the way to go. It beats PPF by a wide margin in wealth creation over 15 years.
But if your focus is safety, tax benefits, and assured returns, then PPF is the safer bet. In fact, a smart financial strategy could be to combine both — invest in SIP for growth and PPF for stability.
So before choosing, ask yourself: Are you building wealth or saving safely? The answer will decide your ideal investment.
