worldofcalcsSIP vs PPF: Which Is Better for ₹1.5 Lakh a Year? (2026)
PPF and mutual fund SIPs are the two most popular long-term savings choices in India. One is a guaranteed government scheme; the other rides the stock market. Here's how ₹1.5 lakh a year compares over 15 years.
The two options
| PPF | Equity mutual fund SIP | |
|---|---|---|
| Return | 7.1% (October–December 2026), set every quarter by the government | Not fixed; equity funds have averaged roughly 10–12% over long periods, with bad years along the way |
| Risk | None to the principal; government-backed | Market risk; can fall 20–40% in a bad year |
| Tax on returns | Tax-free (EEE) | Gains above ₹1.25 lakh a year taxed at 12.5% after 12 months |
| Tax deduction | 80C, up to ₹1.5 lakh (old regime only) | Only ELSS funds qualify for 80C (old regime) |
| Lock-in | 15 years; partial withdrawals from year 7, loans from year 3 | None (ELSS: 3 years) |
| Limit | ₹500 – ₹1.5 lakh a year | No limit |
₹1.5 lakh a year for 15 years
Both options invest ₹22,50,000 in total.
| Option | Value after 15 years |
|---|---|
| PPF at 7.1% | ₹40,68,208, all tax-free |
| SIP of ₹12,500 a month at 12% | ₹63,07,200 before tax; about ₹57,96,014 after tax if all sold at once |
| SIP at 10% | ₹52,24,053 before tax |
| SIP at 8% | ₹43,54,314 before tax |
At a 12% average, the SIP ends up about ₹17 lakh ahead, even after tax. If equity returns average only 8%, the SIP barely matches PPF after tax, and it took far more risk.
The SIP tax figure assumes you sell everything in one year. Selling over several years uses the ₹1.25 lakh yearly exemption more than once and lowers the tax.
How to choose
PPF suits you if:
- you want a guaranteed, tax-free result for a fixed goal, such as a child's education in 15 years;
- you use the old regime and want the 80C deduction;
- you would panic and sell in a market crash.
A SIP suits you if:
- your goal is 10 or more years away and you can ride out bad years;
- you want flexibility to stop, top up or withdraw;
- you want to invest more than ₹1.5 lakh a year.
Most people should use both
PPF works well as the safe part of a long-term portfolio, and an equity SIP as the growth part. A common split is to fill PPF (or EPF/VPF) for the debt portion and put the rest into equity SIPs, shifting towards PPF and other safe options as the goal gets closer.
If you already contribute to EPF through work, you have a large guaranteed component. You may need PPF less, and can lean more on SIPs.
Run your own numbers
Compare the options with the PPF calculator and the SIP calculator. To work back from a target amount, use the SIP goal planner.
Mutual fund investments are subject to market risks and returns are not guaranteed. The PPF rate can change every quarter.