SIP vs PPF: ₹1 Lakh Annual Investment – Returns After 15 Years

📊 SIP vs PPF with 1,00,000 Annual Investment: Which Grows a Bigger Corpus in 15 Years?

Creation of long-term wealth is among the most crucial aims of all investors. In case of retirement, children education or financial freedom, it is important to select the right investment choice.

Systematic Investment Plans (SIP) and Public Provident Fund (PPF) are considered to be two of the most used long-term investment options in India. Millions of investors trust both of them but they operate in completely different ways.

Today, we are making a comparison of SIP vs PPF with a fixed amount of 100,000 rupee in 15 years, and we establish which one can be used to enable you to grow a larger corpus.

📈 What is a Systematic Investment Plan (SIP)?

Systematic Investment Plan (SIP) enables an investor to deposit recurring amounts in mutual funds, which is often monthly.

SIP is applicable to beginners and salaried people as opposed to investing a large amount of money at once since you can invest little and small amounts over the years.

🔹 Key Features of SIP:

• Invest monthly or quarterly
• Hires on market-linked returns.
• Benefits from compounding
• Uses rupee cost averaging
• Very flexible (can pause, amend or terminate any time).

SIP is mostly applied to investing in mutual funds, which is a strategy of increasing in the long run.

🏦 What is Public Provident Fund (PPF)?

Public Provident Fund (PPF) refers to a savings plan sponsored by the government of India and meant to secure a long-term financial security.

It has assured returns and tax incentives, which makes it suitable among cautious investors.

🔹 Key Features of PPF:

• Government-supported scheme
• Fixed interest rate (quarterly revised)
• 15-year lock-in period
• Risk-free investment
• Tax-free maturity

PF can be applied to retirement planning and safe wealth creation.

💰 Compared to PPF, the Tax Benefits of SIP

One of the considerations during investment selection is the tax savings.

✅ PPF Tax Benefits (EEE Model)

PPF uses Exempt-Exempt-Exempt (EEE) taxation system:

• Investment: 80C tax free.
• Interest: Tax-free
• Maturity: Tax-free

This renders PPF as being among the most efficient investments in terms of taxation in India.

✅ SIP Tax Benefits

Automatic tax benefits are not offered by SIP.

But when you make investments under ELSS mutual funds, then you are eligible to claim deductions under Section 80C.

The other equity SIPs are subjected to capital gains taxation.

📊 The Assumptions in SIP Calculation

To make a fair comparison we can assume:

• Monthly SIP: ₹8,333
• Annual Investment: ₹1,00,000
• Investment Period: 15 Years
• Projected Return: 12 per cent per annum (average equity return).

Note: The payout of SIPs is linked with the market and not guaranteed.

📈 SIP Returns over 15 Years (₹8,333 per Month)

Assuming a 12 per annum return, the SIP investment can produce:

• Total Investment: ₹14,99,940
• Estimated Returns: ₹27,04,692
• Total Corpus: ₹42,04,632

This demonstrates the strength in the equity investments under the concept of compounding.

🏦 Assumptions in the Calculation of PPF

For PPF, we assume:

• Yearly Investment: ₹1,00,000
• Investment Period: 15 Years
• Interest Rate: 7.1% per annum
• Lock-in: 15 Years

The government sets PPF interest rate and could vary with time.

📉 PPF Returns in 15 Years (₹1,00,000 Per Year)

PF at 7.1 interest rate can produce:

• Total Investment: ₹15,00,000
• Estimated Returns: ₹12,12,139
• Total Corpus: ₹27,12,139

The returns are tax free and guaranteed.

📋 SIP vs PPF Comparison Table

⚖️ Which is Better: SIP or PPF?

The appropriate decision would be based on your financial targets and risk aversion.

✅ Choose SIP If:

• You desire more long-term returns.
• Market fluctuations can be managed.
• You are making wealth through investment.
• You possess a long-term horizon to investment.

SIP will be adapted in aggressive and growth oriented investors.

✅ Choose PPF If:

• You want guaranteed returns
• You prefer low risk
• You need tax-free income
• You desire fixed retirement plans.

PPF is suitable to the conservative investors.

🤝 Is it Possible to Invest in Both SIP and PPF? (Best Strategy)

Yes, and this is really the cleverest thing to do.

The way to approach it is to invest in both SIP and PPF:

• SIP → Wealth Creation
• PPF → Safety + Tax Savings

This has the advantage of growing and securing simultaneously.

Example Strategy:

• ₹60,000 per year in SIP
• ₹40,000 per year in PPF

This aids in diversification of investment.

⚠️ Important Risks to Consider

SIP Risks

• Market volatility
• Short-term losses
• Requires patience

PPF Limitations

• Low returns
• Long lock-in
• Limited liquidity

It is knowledge of these risks that will make you invest in a wise way.

✅ Final Verdict: SIP and PPF in 15 Years

Investment of 15 years with an investment of 1,00,000/annum:

• SIP may generate around ₹42 lakh
• PPF may generate around ₹27 lakh

SIP can generate 50 percent (or more) more wealth than PPF though at greater risk.

PPF will be safe, tax-friendly but lowering its growth.

👉 SIP is superior when it comes to creating maximum wealth.

👉 PPF is more appropriate in case you want to save money in terms of capital safety and taxes.

👉 To have the best of both worlds invest in both.

📝 Conclusion

SIP and PPF are both great choices of long term investments in India. It must be based on your age, income, financial objectives and risk aversion.

SIP is the best investment in case of a young investor looking to grow aggressively.

PF is stable to risk averse investors.

A combination of both is a financial balance to smart investors.

Always do financial analysis and talk to a certified financial advisor whenever necessary before investing.

⚠️ Disclaimer

This is an informative article. It is not financial advice. There are market risks on investment returns. It is advisable that you seek the services of a competent financial planner before investing.