Mutual Funds vs PPF: Turn your Rs 12,500pm investment, into Rs 39,44,600 or Rs 52,24,053! Here is how - EXPLAINED

Mutual Funds vs PPF: In the last six to nine months, equity-linked mutual fund investments have been topsy-turvy. In this scenario, people have realised the importance of diversified portfolio and government-backed small saving schemes, especially PPF or Public Provident Fund. According to the tax and investment experts, mutual funds and PPF are for two different types of investors as it is related to their risk appetite. If an investor has a good risk appetite, then he or she should go for the mutual funds as in long-term perspective, it gives around 10 per cent returns post-tax. However, in case of PPF, one will get an assured return, which is currently at 7.1 per cent.

Speaking on the Mutual Funds vs PPF comparison, SEBI registered tax and investment expert Jitendra Solanki said, "In mutual funds, there is tax levied on the maturity amount while in the case of PPF, it falls under the EEE category. It means one will get income tax exemption on investment (up to Rs 1.5 lakh per annum), interest earned and the maturity amount. However, when it comes to mutual funds, one will get higher returns in the long-term and if the investment is for the same 15 years as it is in the case of PPF maturity period, then one can expect to get at least 10 per cent return post-tax."

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Commenting upon the difference between the PPF and Mutual Fund investments; Kartik Jhaveri, Director — Wealth Management at Transcends Consultants said, "One should have a diversified portfolio even when the risk appetite of an investor is high. One should invest in both PPF and mutual funds as there has to be some assured return in one's portfolio.

Assuming what these experts says, if an investor invests Rs 12,500 per month in both PPF and mutual funds, the PPF calculator suggests that one will get Rs 39,44,600 as maturity amount after 15 years. Apart from this, it will be free from any kind of income tax as it will fulfill the Section 80C criteria for investment, interest earned and maturity amount.

Source: HDFC Bank PPF Calculator

Similarly, if an investor invests Rs 12,500 per month in mutual funds for the same 15 years, one's maturity amount will be Rs 52,24,053. Significantly, this is a post-tax amount.  

Speaking on Mutual Funds vs PPF Kartik Jhaveri said, "For long-term, one's investment in mutual funds should be higher in comparison to PPF as it's better to give tax after earning more than to give no income tax and earn less."