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Should I Invest In PPF Or Mutual Funds?

Published On Dec 14, 2021 10:00 AM By InsuranceDekho

PPF or Public Provident Fund is a scheme specially made for individuals to help them save a part of their income annually, in order to build post-retirement savings or retirement corpus. The amount deposited into the PPF scheme makes an individual eligible to receive interest on the principal amount with tax-saving benefits. PPF was introduced to encourage those individuals who don’t fall under the Employee Provident Fund Organization (EPFO) to save and build a retirement corpus. A tax benefit of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act can be availed through the PPF scheme.

Mutual funds are one of the forms of investment instrument when an asset management company or fund house pools out investment from individual investors and institutional investors. The fund manager buys securities like bonds and stocks from the market that is in line with the investment mandate. Mutual funds are excellent options to diversify investment portfolios.

What Are The Benefits Of A PPF Account?

Following are the benefits an individual can avail from a PPF account–

  • The interest on PPF balance is compounded on a yearly basis
  • PPF account offers a tax deduction of up to Rs. 1.5 lakh
  • PPF lock-in period is 15 years, which makes it a good option to save a good amount of money for a longer period of time
  • Loans can be availed from the PPF account
  • The minimum amount to deposit in a PPF account is Rs. 500 only
  • PPF tenure can be extended in the block of 5 years
  • Partial withdrawal is allowed after the completion of the 6th financial year
  • Who can open a PPF account?
  • Listed below are the people who are eligible to open a PPF account–
  • Only Indian citizens are eligible to open a PPF account
  • An Indian citizen settled abroad can continue operating his/her PPF account
  • Parents/guardians on behalf of their minor children can open a PPF account

What Are The Benefits Of A Mutual Fund?

Given below are a number of reasons a person should or try investing in a mutual fund-

  • The mutual fund investments are managed by experts. All the investments are managed by fund managers which are pooled by the asset management companies and fund houses
  • There is no lock-in period. There are mutual funds that are open-funded and often come with varying exit loads on the exemption
  • Mutual funds come at a low cost, which makes them a convenient and suitable option for small investors
  • Investment can be made via SIP (Systematic Investment Planning). SIP frequency can be monthly, quarterly and bi-annually
  • Mutual funds offer fund plans that make it easy for investors to meet their short and long term goals
  • Switching funds is easy. An investor can move his/her investment to a different fund of the same fund house
  • The investment made into mutual funds are invested into different assets and shares of several companies
  • Mutual funds offer dual benefits, which are SIP and no lock-in period, these benefits together makes it a lucrative investment tool
  • Mutual funds offer liquidity
  • Mutual funds houses and mutual fund plan works under the purview of the Securities and Exchange Board of India (SEBI) and Reserve Bank of India (RBI)
  • Buying and selling of the fund units are made at the prevailing net asset value of the mutual fund plan
  • An investor can track his/her mutual fund investment


PPF vs Mutual funds both are quite debatable due to their disadvantages, advantages, features, tax benefits, maturity period, etc. Before choosing one out of the two, it is important to understand what they offer to the investor along with the time period to keep the amount invested till maturity. Apart from that, it is also crucial to figure out if there is a partial withdrawal facility available with the investment scheme or not. Once considering all the factors, it is wise to understand the personal requirements, financial goals and more before choosing the one. Help from experts can make the decision a little easier.

Also read - MIPs - Know Everything About MIPs In India

Investment Options That Help You Save Taxes

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.

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