Table of Contents
A data-checked comparison for Indian investors, retirees and NRIs — including the numbers most published comparisons get wrong.
7.1%
PPF rate — unchanged since April 2020
6.88%
What equity must beat to beat PPF
₹31,961 cr
Monthly SIP inflows, July 2026
Every few months the same article reappears: “SIP gives 12%, PPF gives 7.1%, so SIP wins.” The conclusion is often right. The arithmetic behind it usually isn’t — and the two things that actually decide your answer, your tax regime and your time horizon, rarely get a mention. This guide redoes the comparison properly: correct compounding, the real ₹1.5 lakh PPF ceiling, the 2026 tax rules, and what Indian equity has actually delivered rather than what a calculator assumes it will.
01 Start with what these two things actually are
The first correction is a definitional one. PPF is a product. SIP is not. A Systematic Investment Plan is simply a standing instruction to invest a fixed amount every month — into anything. You can run a SIP into a liquid fund and earn 6%. Comparing “PPF vs SIP” only makes sense if you mean PPF vs a monthly SIP into a diversified equity mutual fund, which is the comparison this guide makes throughout.
| Feature | PPF | Equity SIP |
|---|---|---|
| What it is | A government small-savings scheme | A method of investing into a market-linked fund |
| Who guarantees it | Government of India — sovereign backing on principal and interest | Nobody. Returns are not guaranteed |
| Current return | 7.1% p.a., reset every quarter by the Finance Ministry | Not fixed. Long-run Nifty 50 TRI has been roughly 12–13% |
| Annual limit | ₹1,50,000 per person, per financial year (combined across your own and any minor account) | No upper limit |
| Lock-in | 15 financial years from the end of the year the account is opened. Partial withdrawal allowed from year 7 | None. ELSS funds carry a 3-year lock-in per instalment |
| After maturity | Extendable in 5-year blocks, with or without fresh deposits | Continues indefinitely |
| Tax on maturity | Fully exempt (EEE) | LTCG at 12.5% on gains above ₹1.25 lakh a year |
| Biggest risk | The rate can be cut. It has been, repeatedly | Your corpus can fall 30–50% in a bad year |
PPF accepts a maximum of ₹1,50,000 per financial year — that is ₹12,500 a month. Any deposit above this earns no interest and is simply returned. This single rule invalidates a lot of published comparisons, which routinely show “₹15,000/month in PPF vs SIP” scenarios that cannot legally exist. It also means PPF cannot be your whole plan once your savings capacity crosses ₹12,500 a month. At that point the question stops being “PPF or SIP” and becomes “PPF and what else”.
02 The comparison, done with correct compounding
Assumptions used below, stated openly: ₹10,000 invested on the 1st of every month; SIP compounded monthly at 12% per annum; PPF at the current 7.1%, with interest calculated on the lowest balance between the 5th and month-end and credited annually — which is how PPF actually works. All figures are pre-tax.
| Horizon | Total invested | SIP @ 12% | PPF @ 7.1% |
|---|---|---|---|
| 15 years | ₹18.00 lakh | ₹50.46 lakh | ₹31.56 lakh |
| 20 years | ₹24.00 lakh | ₹99.91 lakh | ₹51.65 lakh |
| 25 years | ₹30.00 lakh | ₹1.90 crore | ₹79.96 lakh |
| Horizon | Gain in SIP | Gain in PPF | SIP corpus as a multiple of PPF |
|---|---|---|---|
| 15 years | ₹32.46 lakh | ₹13.56 lakh | 1.60× |
| 20 years | ₹75.91 lakh | ₹27.65 lakh | 1.93× |
| 25 years | ₹1.60 crore | ₹49.96 lakh | 2.37× |
Read the third column carefully, because it carries the real message: the gap is not constant — it widens with time. At 15 years SIP produces about 60% more. At 25 years it produces well over twice as much. Nothing about the two products changes in between; compounding simply has longer to do its work on the higher rate. If your horizon is short, the “equity wins by miles” claim collapses.
If you invest the PPF maximum instead (₹12,500 a month)
Over 15 years: SIP ₹63.07 lakh vs PPF ₹39.45 lakh. Over 25 years: SIP ₹2.37 crore vs PPF ₹99.95 lakh.
The ratios are identical (1.60× and 2.37×) because both scale linearly with the amount invested. Only the absolute rupee gap changes.
03 The break-even nobody puts in the table
Instead of assuming 12%, ask the more useful question: what return does equity actually need to deliver for SIP to beat PPF? The answer is far lower than most people expect, and it does not change with horizon.
| Basis | Return SIP must beat | Why |
|---|---|---|
| Pre-tax | 6.88% p.a. | 7.1% compounded annually equals 6.88% compounded monthly |
| After LTCG tax, 15-year horizon | 7.50% p.a. | Assumes the entire corpus is redeemed in a single year |
| After LTCG tax, 25-year horizon | 7.40% p.a. | Larger corpus, so the ₹1.25 lakh exemption matters less |
So equity does not need to deliver 12% to win. It needs to deliver about 7.5% after tax over your holding period. Indian equity has cleared that bar over almost every long window in its history — but it has done so unevenly, and that unevenness is the part worth understanding before you commit.
| If your 15-year SIP delivers | Your corpus | PPF corpus | Outcome |
|---|---|---|---|
| 8% p.a. | ₹34.83 lakh | ₹31.56 lakh | SIP ahead by ₹3.3 L |
| 10% p.a. | ₹41.79 lakh | ₹31.56 lakh | SIP ahead by ₹10.2 L |
| 12% p.a. | ₹50.46 lakh | ₹31.56 lakh | SIP ahead by ₹18.9 L |
| 14% p.a. | ₹61.29 lakh | ₹31.56 lakh | SIP ahead by ₹29.7 L |
| 16% p.a. | ₹74.86 lakh | ₹31.56 lakh | SIP ahead by ₹43.3 L |
₹10,000 a month in each case. Note the asymmetry: a 4-point shortfall in equity returns costs you ₹16 lakh, while a 4-point overshoot gains you ₹24 lakh. That skew is the honest case for equity — but it only exists if you stay invested through the bad stretches.
04 What Indian equity has actually delivered
The “12–15% CAGR” figure that appears in almost every comparison is a long-run average, and averages hide the experience of individual investors. Two facts from the actual record are worth sitting with.
| The record | What it means for you |
|---|---|
| The Nifty 50 TRI delivered roughly 12.4% annualised over the 20 years to February 2026 | Over genuinely long windows, the headline assumption has broadly held |
| For FY26, the Nifty 50's 20-year rolling CAGR slipped below 10% — only the second time in the index's roughly 30-year history | Even 20-year windows can undershoot. The 12% assumption is a central estimate, not a floor |
| 15-year Nifty SIP returns fell to around 8% in April 2020, roughly half what the same measure showed in 2014 | A 15-year SIP that happened to end in a drawdown still beat PPF — but only just |
| Rolling studies of the Nifty find the worst 5-year SIP window returned about −4% annualised | Short horizons in equity are not a growth plan. They are a coin toss |
A PPF account maturing in a bad year and a PPF account maturing in a good year pay the same. An equity SIP does not. Two investors with identical ₹10,000 monthly SIPs, starting three years apart, can end up 30% apart purely because of where the market happened to be on their redemption date.
The practical defence is not to pick a better fund. It is to start shifting equity into debt three to five years before you need the money — which is precisely the job PPF, with its predictable maturity value, does well.
05 PPF's own hidden risk: the rate is not fixed
PPF is described as “guaranteed”. What is guaranteed is that you will be paid — not how much. The rate is reset every quarter by the Ministry of Finance, and over the scheme’s life it has moved a long way.
| Period | PPF rate | Context |
|---|---|---|
| 1968–69 | 4.80% | Scheme launch |
| April 1986 – January 2000 | 12.00% | The peak. Tax-free, and double today's rate |
| 2000–2003 | 11.0% falling to 9.0% | Rates begin their long decline |
| 2003–2011 | 8.00% | A long plateau |
| 2012–13 | 8.80% | A brief recovery — the last time PPF paid above 8.7% |
| July 2019 – March 2020 | 7.90% | The step before the current rate |
| April 2020 – present | 7.10% | Unchanged for over six years; held again for July–September 2026 |
That decline is not abstract. Holding the deposit constant at ₹1 lakh a year and changing only the rate environment, a 15-year PPF run produces very different outcomes:
| 15-year PPF run | Effective average rate | Corpus |
|---|---|---|
| Started FY 2001-02 (rates 9.5% falling to 8.7%) | 8.35% | ₹30.22 lakh |
| Started FY 2011-12 (rates 8.2% falling to 7.1%) | 7.56% | ₹28.22 lakh |
| Starting today, if 7.1% holds throughout | 7.10% | ₹27.12 lakh |
Roughly 10% less corpus than the investor who started in 2001, for identical discipline and identical deposits. Nobody defaulted; the rate simply moved. Anyone assuming PPF will hold 7.1% for the next 15 years is making a forecast, not observing a guarantee — and if bond yields fall further, that forecast is optimistic.
06 Tax in 2026 — the rule that changed the whole answer
This is the single biggest gap in older comparisons. Almost all of them credit PPF with a Section 80C deduction. For most taxpayers today, that deduction no longer applies.
The new tax regime is the default. Under the Income-tax Act, 2025 — in force from 1 April 2026 — the old Section 80C has been renumbered as Section 123, with the eligible investments listed in Schedule XV and the ₹1.5 lakh ceiling intact. But that deduction, like most Chapter VI-A deductions, is available only if you actively opt out of the new regime and choose the old one. If you are on the default new regime, your PPF deposit and your ELSS investment both buy you exactly zero tax deduction.
| Tax point | PPF | Equity SIP |
|---|---|---|
| Deduction on investment | ₹1.5 lakh under Section 123 (old 80C) — old regime only | Only ELSS qualifies, and again only under the old regime |
| Tax while invested | None | None until you redeem |
| Tax on gains | None. Interest is fully exempt | LTCG 12.5% on gains above ₹1.25 lakh per year (units held over 12 months) |
| If sold within 12 months | Not applicable | STCG at 20% |
| Tax on maturity | Fully exempt — EEE | Taxable as capital gains |
PPF’s tax exemption is worth more than it looks, because 7.1% tax-free is not the same as 7.1% taxable:
| If your slab rate is | PPF's 7.1% is equivalent to a taxable deposit paying |
|---|---|
| 5% | 7.49% |
| 20% | 8.96% |
| 30% | 10.32% — no bank FD in India currently pays this |
The 25-year worked example, after tax
₹10,000 a month for 25 years. SIP at 12% grows to ₹1.90 crore on ₹30 lakh invested — a gain of ₹1.60 crore.
Redeem the whole thing in one financial year and LTCG at 12.5% (after the ₹1.25 lakh exemption) costs about ₹19.81 lakh, leaving ₹1.70 crore.
PPF over the same period gives ₹79.96 lakh, entirely tax-free.
Net advantage to SIP after tax: roughly ₹90 lakh. Redeeming in tranches through retirement, rather than in one year, reduces that tax bill considerably — the ₹1.25 lakh exemption resets every financial year.
07 Three real situations, with the corrected numbers
Scenario A — 30 years old, salaried, saving for retirement
₹10,000 a month, 25-year horizon.
SIP at 12%: ₹1.90 crore. PPF: ₹79.96 lakh. Equity wins decisively — the horizon is long enough that even a poor decade in the middle is likely to be absorbed. But route the equity through a diversified fund, not a sector bet, and do not stop the SIP in a crash.
Scenario B — 45 years old, conservative, retiring in 15 years
₹12,500 a month (the PPF maximum), 15-year horizon.
SIP at 12%: ₹63.07 lakh. PPF: ₹39.45 lakh. On paper equity still wins — but this is the case where the average is the wrong number to plan with. A 15-year window ending in a drawdown has historically produced around 8%, which would give roughly ₹43 lakh, barely ahead of PPF, and the corpus would be needed almost immediately.
A reasonable split: PPF for the portion you cannot afford to see fall, equity for the portion you can leave untouched for another decade after retirement.
Scenario C — young parent saving for a child’s education, 18 years away
The version of this scenario that circulates online uses ₹15,000 a month in both options. That is not possible in PPF — ₹15,000 a month is ₹1.8 lakh a year, ₹30,000 above the legal ceiling.
Correctly stated: SIP at ₹15,000/month for 18 years at 12% gives about ₹1.15 crore. PPF, capped at ₹12,500/month, gives about ₹53.47 lakh over the same period.
Also worth knowing: Sukanya Samriddhi Yojana pays 8.2% — 110 basis points above PPF, with the same EEE treatment — if the child is a girl under 10. For that specific case it is a strictly better debt option than PPF.
08 NRIs: check this before assuming PPF still works for you
For non-residents the comparison is not symmetrical, because one side of it may not be available to you at all.
| Rule | Position |
|---|---|
| Opening a new PPF account | Not permitted. NRIs are not eligible to open a PPF account |
| An account opened while you were resident | Can generally be continued until maturity, on a non-repatriation basis |
| Extension after 15 years | Not available to NRIs. The account must be closed and proceeds withdrawn |
| Where the money goes | Maturity proceeds are credited to your NRO account; onward remittance is subject to the USD 1 million per financial year FEMA limit |
| The rule most NRIs have not seen | Under the Department of Economic Affairs guidelines effective 1 October 2024, PPF accounts opened under the 1968 Scheme — where Form H did not capture residency status — earn only the Post Office Savings Account rate up to 30 September 2024, and zero interest thereafter |
If you hold a PPF account and became non-resident at any point, write to your bank or post office and get your account’s current interest status confirmed in writing. An account sitting at zero percent while you continue to deposit into it is the worst outcome available, and it will not announce itself on your passbook. Note that the treatment turns on which version of the scheme your account was opened under and what Form H recorded at the time. This is account-specific — verify yours rather than relying on a general article, including this one.
On the SIP side, NRIs can invest in Indian mutual funds through NRE (repatriable) or NRO (non-repatriable) accounts after completing KYC and FATCA self-certification. Two practical differences from residents:
| Point | What applies |
|---|---|
| TDS at redemption | Deducted by the AMC at source — 12.5% on equity LTCG, 20% on equity STCG. Residents face no TDS on mutual fund gains and settle at filing |
| Reclaiming excess TDS | File an Indian return. Treaty relief needs a Tax Residency Certificate, Form 10F and a PAN |
| US and Canada residents | Only a limited set of AMCs accept investments. US residents should also take advice on PFIC treatment before starting an Indian equity SIP |
Match the instrument to the deadline, not to your personality. Money you will need within five years does not belong in equity, however young and risk-tolerant you are. Money you will not touch for fifteen years does not belong entirely in PPF, however cautious you are. The horizon decides — and if you are on the new tax regime, decide it knowing that PPF no longer comes with a deduction attached.
09 Why the answer is usually "both"
Splitting is not a compromise. It is a structurally different risk profile, and the numbers are worth seeing:
| Strategy (₹10,000/month, 20 years) | Corpus | Character |
|---|---|---|
| All PPF at 7.1% | ₹51.65 lakh | Fully predictable, fully tax-free, capped |
| ₹5,000 PPF + ₹5,000 SIP | ₹75.78 lakh | ₹25.82 L guaranteed, ₹49.96 L market-linked |
| All SIP at 12% | ₹99.91 lakh | Highest expected value, no floor |
The split gives up about ₹24 lakh of expected corpus against the all-equity route. In exchange it delivers ₹25.82 lakh that is contractually certain, tax-free, and completely unaffected by what the market does in year 19. For most people approaching a fixed deadline, that floor is worth more than the difference in the average outcome.
- A practical default for a long horizon: use PPF to hold your debt allocation, since at 7.1% tax-free it out-earns almost every comparable fixed-income option after tax, and run everything above ₹12,500 a month into a diversified equity SIP.
- PPF also does something no fund can: the 15-year lock-in makes panic-selling structurally impossible. For investors who know they redeem at the bottom, that is a feature, not a cost.
- Review the mix annually and shift equity toward PPF or debt as your goal comes within five years.
Key Takeaway
Over 15 years or more, an equity SIP has beaten PPF in almost every historical window — and it only needs to deliver about 7.5% after tax to keep doing so. But PPF is not the weak option the headline gap suggests: at a 30% slab it is equivalent to a taxable deposit paying 10.32%, it is capped at ₹12,500 a month so it can never be your whole plan, and its rate has fallen from 12% to 7.1% within one investing lifetime. Use PPF as your debt allocation and equity SIP for everything above it — and if you are on the default new tax regime, stop counting a Section 80C deduction that you are no longer claiming.
10 Where to verify, and who to call
| What you need | Where | Contact |
|---|---|---|
| Current PPF and small-savings rates | Department of Economic Affairs, Ministry of Finance | dea.gov.in — quarterly notification |
| PPF account rules and forms | India Post / your bank branch | indiapost.gov.in |
| Mutual fund scheme and returns data | Association of Mutual Funds in India | amfiindia.com |
| Mutual fund or distributor complaint | SEBI SCORES | scores.sebi.gov.in · 1800 266 7575 |
| Income tax and TDS queries | Income Tax Department helpline | 1800 103 0025 |
| Unauthorised scheme or fake "guaranteed return" offer | RBI Sachet | sachet.rbi.org.in |
| Financial fraud — report within the golden hour | National Cybercrime Reporting Portal | 1930 · cybercrime.gov.in |
