SIP vs PPF: the return a SIP needs to match PPF
PPF pays a declared, tax-free rate. An equity SIP has no declared rate and its long-term gains are taxed. This page works out both on the same monthly amount, and the break-even return where they come out equal after tax.
The same ₹12,500 a month for 15 years
₹12,500 a month is ₹1.5 lakh a year, the PPF limit. Paid into PPF by the 5th of each month at 7.1%, it grows to ₹39,44,599, tax-free. The same amount in an equity SIP at an assumed 12% grows to about ₹63.07 lakh; if all of it were redeemed in one year, long-term capital gains tax of 12.5% on gains above ₹1.25 lakh would take about ₹4.92 lakh, leaving about ₹58.16 lakh.
The break-even point is the more useful number. At these settings, the SIP needs to return about 7.5% a year, after its own costs, to match PPF after tax. Above that it comes out ahead; below it, PPF does.
Why the two are hard to compare directly
PPF's rate is declared each quarter and has been 7.1% for several years; it can change, but it cannot go negative. A SIP's return is whatever the market delivers, and over any particular 15 years it may land well above or below the assumption. The break-even return tells you how much the SIP has to do, not whether it will.
Liquidity also differs. SIP units can be redeemed any time (except ELSS, with a three-year lock-in). PPF allows partial withdrawals only from the seventh year.
How the figures are worked out
- PPF: interest each month on the balance after the 5th, credited yearly, at the rate you set.
- SIP: invested at the start of each month, compounded monthly at the assumed return (the same method as the SIP calculator).
- SIP tax: 12.5% on gains above ₹1.25 lakh, as if redeemed in one financial year. Spreading redemptions over several years would reduce it.
Common questions
Is SIP better than PPF?
It depends on the return the SIP actually earns. For ₹12,500 a month over 15 years, an equity SIP needs about 7.5% a year to match PPF at 7.1% after tax; above that it ends ahead, below it PPF does. PPF's rate is declared; the SIP's is not guaranteed.
How much is ₹12,500 a month in PPF for 15 years?
At 7.1%, deposited by the 5th of each month, about ₹39.45 lakh, tax-free.
Are SIP returns taxed?
Equity fund units held over 12 months are taxed at 12.5% on gains above ₹1.25 lakh in a financial year; under 12 months, at 20%.
Sources
- India Post: savings schemes and current interest rates (PPF, Sukanya Samriddhi, NSC, SCSS, KVP)
- Income Tax Department: navigator from Income-tax Act, 1961 sections to the 2025 Act
Checked 29 October 2026.