What is the PPF vs Mutual Fund?
PPF offers a government-guaranteed, fully tax-free return with a 15-year lock-in and a ₹1.5 lakh annual cap. Equity mutual funds have no cap, better liquidity and historically higher returns — but no guarantee and 12.5% LTCG tax above ₹1.25 lakh of annual gains.
The honest comparison is PPF's guaranteed 7.1% tax-free against equity's uncertain ~12% pre-tax.
Formula & worked example
Fund (net) = Σ contributions at fund return − LTCG tax on gains
Worked example: ₹1,50,000 a year for 15 years. PPF at 7.1% matures at about ₹40.7 lakh, entirely tax-free. An equity fund at 12% reaches about ₹62.6 lakh; after 12.5% LTCG on the gain, less the ₹1.25 lakh annual exemption (₹4.86 lakh tax), it nets roughly ₹57.8 lakh — around ₹17.1 lakh ahead, but with real volatility along the way.
How to use this ppf vs mutual fund calculator
- Enter your annual contribution — PPF caps at ₹1.5 lakh.
- Set the period; PPF has a 15-year minimum lock-in.
- Use the current PPF rate and a realistic 10–12% for equity.
- Compare the after-tax fund value against the tax-free PPF value.
Smart tips
- It is rarely either/or. PPF is an excellent debt allocation; equity funds handle the growth portion.
- PPF is EEE — contribution, interest and maturity are all tax-free, which is increasingly rare.
- Deposit before the 5th of the month; PPF interest is calculated on the lowest balance between the 5th and month-end.
- PPF can be extended in five-year blocks after 15 years, with or without further contributions.
- For goals under 7 years, PPF's certainty usually beats equity's volatility regardless of the averages.
Frequently asked questions
Is PPF better than mutual funds?
PPF is safer and tax-free; equity funds have historically delivered more over 15+ years. Most investors should hold both, with PPF as the debt portion.
What is the current PPF interest rate?
7.1% for the July–September 2026 quarter, revised quarterly by the government and fully tax-free.
Are mutual fund returns taxable?
Equity funds held over a year pay 12.5% LTCG on gains above ₹1.25 lakh per year. PPF returns are entirely tax-free.
Can I invest more than ₹1.5 lakh in PPF?
No. ₹1.5 lakh per financial year is the maximum across all your PPF accounts. Excess deposits earn no interest.
Want the theory behind the numbers? Read our PPF guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 15 Oct 2026. Sources: Department of Posts — small-savings interest rates: PPF 7.1%, NSC 7.7%, KVP 7.5%, SSA and SCSS 8.2%, MIS 7.4% (page reviewed 12 Aug 2026). How we check these numbers.