SIP vs PPF: Which Can Build a Bigger Corpus with ₹95,000 Annual Investment?
SIP vs PPF: Which Can Build a Bigger Corpus with ₹95,000 Annual Investment?
Investors often face a common dilemma—should they put their money in the risk-free Public Provident Fund (PPF) or opt for market-linked mutual fund Systematic Investment Plans (SIPs)? A comparative analysis shows a significant difference in wealth creation over a 15-year horizon when investing ₹95,000 annually.
PPF: Safe and Tax-Free
The Public Provident Fund, backed by the Government of India, currently offers an interest rate of 7.1% per annum, compounded annually. With a 15-year lock-in and full tax exemptions on investment, interest, and maturity, PPF is considered one of the safest investment avenues.
If an investor contributes ₹95,000 annually, the maturity corpus after 15 years will be around ₹27.7 lakh, completely tax-free.
SIP: Market-Linked Growth
On the other hand, investing ₹95,000 per year through monthly SIPs in equity mutual funds (approx. ₹7,900 per month) has historically delivered higher returns. Assuming a 12% CAGR, the investment could grow to nearly ₹43.5 lakh in 15 years. Even at a conservative 10% CAGR, the corpus would be around ₹38 lakh, while at 14% CAGR, it may cross ₹50 lakh.
Unlike PPF, SIP returns are subject to market risk, and long-term capital gains above ₹1 lakh are taxed at 10%. However, SIPs also offer flexibility with no fixed lock-in period (beyond exit loads).
Year-Wise Corpus Projection
| Year | PPF Corpus (₹) | SIP Corpus (₹) |
|---|---|---|
| 1 | 1,01,745 | 1,01,407 |
| 2 | 2,10,714 | 2,15,675 |
| 3 | 3,27,420 | 3,44,436 |
| 4 | 4,52,411 | 4,89,526 |
| 5 | 5,86,278 | 6,53,017 |
| 10 | 13,90,819 | 17,69,604 |
| 15 | 27,71,665 | 43,52,107 |
(Values are approximate, based on 7.1% fixed for PPF and 12% CAGR for SIPs)
The Verdict
While PPF ensures safety and guaranteed tax-free returns, SIPs in equity mutual funds have the potential to generate 1.5–2 times higher corpus over the same period. Financial experts suggest a balanced approach—allocating funds to both PPF for security and SIPs for growth—to achieve long-term financial goals.
