Rs 1,000 SIP Vs PPF: Which One Gives Better Returns In 15 Years?

When planning for the long term, many conservative or first-time investors often turn to options like the Public Provident Fund or monthly Systematic Investment Plans in mutual funds. Let’s assume that an investor is deciding between investing Rs 1,000 per month in a PPF or starting a Rs 1,000 monthly SIP. Both have their own set of advantages, but which one offers better returns over a 15-year period? Let’s find out.

PPF is a government-backed small savings scheme with a lock-in period of 15 years. It currently offers a fixed interest rate of 7.1% per annum (as of July 2025), compounded annually. Contributions to PPF qualify for deduction under Section 80C of the Income Tax Act. The interest earned is tax-free too.

Let’s assume you invest Rs 1,000 per month in a PPF account. At the current interest rate of 7.1%, your total contribution over 15 years would be Rs 1.8 lakh and the maturity amount would be around Rs 3.25 lakh. The returns are steady, secure and tax-free, making PPF ideal for risk-averse investors.

SIPs involve investing a fixed amount regularly in a mutual fund scheme, typically equity-oriented for long-term goals. Unlike PPF, SIP returns are market-linked and not guaranteed. Over long durations, equity mutual funds tend to outperform most fixed-income instruments.

Assuming an average annual return of 12% (historical average for diversified equity mutual funds), a Rs 1,000 monthly SIP for 15 years could grow to around Rs 5 lakh. That’s nearly Rs 1.8 lakh more than what’s earned in PPF.

There are caveats. Mutual funds carry market risks and returns can fluctuate based on market conditions. The final corpus may be lower or higher depending on fund performance. Also, long-term capital gains (LTCG) on equity funds above Rs 1.25 lakh are taxable at 12.5%.

PPF scores high on safety, but locks your money for 15 years, with partial withdrawals allowed only after six years. SIPs in mutual funds are more flexible. You can withdraw at any time (except in ELSS funds), though staying invested for the long term is recommended for best results.

If your priority is safety, guaranteed returns and tax-free maturity, PPF should be your go-to option. If you are willing to take some risk for potentially higher returns, a Rs 1,000 SIP in equity mutual funds may be a smarter choice in the long run.

For a balanced approach, it’s best to split your money between both instruments to enjoy the benefits of safety as well as growth.