Know the Differences between PPF and Mutual Funds

Two famous investment options are PPF (Public Provident Fund) and Mutual Funds. Both these investment choices have their own sets of differences.

A public provident fund (PPF) is a long-term investment option, and it is backed by the Indian Government. PPF offers guaranteed returns to investors. This rate of interest is set by the Indian Government every quarter. It has a fixed investment period, with the minimum amount of investment per year as Rs. 500 and a maximum of Rs 1.5 lakh for each financial year. The principal amount, the interest earned and the maturity amount of PPF is completely tax-free. PPF has a lock-in period of 15 years, in some cases premature withdrawals are possible only from the 7th year of making the investment. PPF is a low-risk investment option.

Mutual funds - on the other hand, are professionally managed investment funds that pool money from different investors. A mutual fund invests in various classes, such as - stocks, bonds, and other securities. Mutual funds are set up and managed by AMCs (asset management companies), and the returns of the investment would depend on the performance of the underlying assets in which it is invested.

PPF vs Mutual Fund - The Major Differences are:

PPF offers a guaranteed return, while mutual fund returns are based on market movements.
PPF has a lock-in period, while some Mutual Funds come with an exit load if the investor redeems the investments before a specific period. And there are some types of Mutual Funds with a lock-in period.
PPF has a tax relief under Section 80C, and the interest on PPF is tax-free. Only ELSS Mutual funds have tax relief under Section 80C, However, returns from Mutual Funds attract capital gains tax.
Returns in PPF are guaranteed, and they are backed by the government. Returns on Mutual funds are not guaranteed and are subject to market risks.