PPF vs Mutual Fund

Investors looking to save on taxes invest their money in various options, with the two most popular schemes being PPF and Tax Saver Mutual Funds (ELSS Mutual Funds).

Understanding the Basics of These Two Schemes

What is PPF?

A government-backed savings scheme designed to encourage long-term savings. It offers guaranteed returns and tax benefits, with a fixed tenure of 15 years.

What are Tax Saver Mutual Funds (ELSS)?

Professionally managed investment vehicles that pool money from multiple investors to invest in a diversified portfolio of stocks, bonds, and other securities. Returns are market-linked and can vary significantly. ELSS also provides tax benefits.

Now lets discuss the difference between the two schemes:- 

After studying the table, you may feel that PPF is a better scheme since it offers fixed returns, no taxes on the returns or the invested amount (₹1.5 lakh), making it a risk-free option with good returns and significant tax benefits, right?

Returns Calculation

Now, let's take an example and see what happens after 15 years if we invest in a particular scheme.

Suppose you invest 1.4 Lakhs yearly into PPF and ELSS mutual funds.Now lets calculate the returns of both the schemes

As you can see, you earn significantly more in ELSS Mutual Funds over time. Relying solely on PPF may not be the smartest investment strategy. Instead, by investing in both ELSS and PPF, you can achieve higher returns in the long run while also saving on taxes. PPF provides security, while ELSS allows you to take risks and grow your corpus, creating a balanced investment approach.