Choosing Between ULIP and PPF:

What is Public Provident Fund?

Understanding ULIP vs PPF is essential before purchasing any plan. Let's start with the Public Provident Fund (PPF). This is a savings scheme run by the Government of India. It was designed to help people save money for their future, especially after retirement.

PPF is a safe option. The contribution earns interest every year. This interest is fixed by the government and is revised quarterly. It has a lock-in period of 15 years which means you can only withdraw the full amount after 15 years. Despite that, PPF offers good tax benefits.

Some Top Features of PPF (benefits of investing in PPF)

• Safe and Government-backed: PPF is one of the safest ways to save money. The government assures to return your money along with earned interest.
• Fixed Returns: The interest rate is fixed by the government every three months. The rate for April–June 2025 is 7.1%.¹
• Tax-Free Returns: You don’t have to pay any tax on the interest you earn from PPF. This makes it a great tax-saving option.
• Long-term Savings: PPF is best for people who want to save for their retirement or long-term goals like buying a house or children’s education.
• Low Minimum Deposit: You can start with as little as ₹500 per year. The maximum limit is ₹1.5 lakh in a year.²
• Loan and Partial Withdrawal: You can take a loan against your PPF after 3 years till the 6^th year. Partial withdrawals are allowed from the 7th year.³

What is a Unit Linked Insurance Plan?

A ULIP is a type of insurance plan that provides you with life cover along with a chance to grow your invested amount. In a ULIP, a part of the premium paid is allocated to life insurance and the other part is invested in funds like equity, debt, or a combination of both. These funds work like mutual funds. You can track their performance and even switch between them.

You can also use ULIP calculators available online to get an estimate of returns. However, one must note that the actual returns depend on the market performance.

Some Top Features of ULIPs

• Dual Benefit: ULIPs provides life insurance and a chance to grow your invested amount in a single plan.
• Fund Switching: Few plans allow you to switch your funds, based on market performance.
• Partial Withdrawals: After 5 years, partial withdrawals are allowed as per policy terms and conditions.
• Top-ups: You can add additional funds to your ULIP anytime during the policy term.
• Tax Benefits: You can get tax deductions under Section 80C of the Income Tax Act under the old regime. But if your yearly premium is more than ₹2.5 lakh (for policies bought after Feb 1, 2021), you may have to pay tax on returns.
• Lock-in Period: The minimum lock-in period is 5 years.
• Market-linked Returns: Returns are not fixed and may vary upon the performance of funds chosen.

Difference ULIP vs PPF

There are many factors to be considered when comparing ULIP and PPF. One major difference is that PPF gives fixed interest, while ULIPs give returns based on market performance. PPF is very safe and ideal for people who prefer a risk-free approach. ULIP, on the other hand, is suitable for people willing to accept some risk in exchange of potential growth.

PPF has a long lock-in of 15 years. ULIPs have a shorter lock-in of 5 years. ULIPs primarily also offer life insurance, which PPF does not.

Factors to Consider Before Choosing ULIP and PPF

• Risk Level: PPF is safe. ULIP is risk associated as it is linked to the market performance.
• Returns: PPF gives fixed returns. ULIP returns can fluctuate depending on the fund performance.
• Lock-in Period: 15 years for PPF, 5 years for ULIP.
• Insurance: ULIP provides life cover while PPF does not.
• Tax Benefits: Both offer tax benefits under Section 80C of the Income Tax Act.
• Withdrawal Options: PPF allows partial withdrawal after 7 years. ULIP however allows it after 5 years.
• Goal Type: PPF suits long-term saving goals. ULIP on the other hand is ideal for combination wealth building and protection.

Which is Better - ULIP or PPF?

Here’s a quick guide to help you decide:

• Choose PPF if: You want a safe savings plan for your future with fixed returns.
• Choose ULIP if: You want both insurance and potentially long-term financial growth through market-linked options.
• Your Risk Comfort: Choose PPF if you don’t have an appetite for market risk and ULIP if you can digest market ups and downs.
• Your Investment Goal: Both PPF and ULIP are long-term options. PPF is ideal for stable wealth creation over time, often used for retirement. ULIP fits if you want to build wealth while securing your family’s financial future with life cover.

Conclusion

PPF and ULIP have different purposes and are designed for a different types of customers. PPF is good for those who a secure home for their money with a fixed return. PPF is backed by the government, therefore there’s carrying a minimal risk. ULIPs, on the other hand, help you potentially grow your money through market-linked funds along with life insurance cover, which is a significant advantage.

Before choosing, one must consider their goals. Do you prefer fixed savings? Do you want insurance too? Once you answer these, the choice becomes simple.

In simple words:

• Want safety and stable returns? Pick PPF.
• Want growth and insurance in one? Pick ULIP.
• Still confused? Ask a financial expert.

FAQs

How do ULIP or PPF suit your financial goals?

PPF (Public Provident Fund) and ULIP (Unit Linked Insurance Plan) are essentially savings and life cover options for individuals, respectively. PPF is a risk-free savings option because the government gives fixed interest and the return is guaranteed. ULIP is ideal for those who want to potentially help grow their savings by taking the risk of market fluctuations while also obtaining life insurance.

Which scheme can provide good returns and Life cover?

You can purchase a ULIP, but these are not risk-free. They provide life insurance and the value of your invested amount will vary as per the market movement. So, the returns may vary; however, it generally provides good returns when held for a longer tenure.

References:

1. https://economictimes.indiatimes.com/wealth/invest/public-provident-fund-ppf-was-interest-rate-changed-for-april-june-2025-quarter/articleshow/120003105.cms?from=mdr
2. https://economictimes.indiatimes.com/wealth/invest/top-5-post-office-deposits-with-returns-up-to-8-20/sukanya-samriddhi-yojana/slideshow/121132421.cms?from=mdr
3. https://www.nsiindia.gov.in/(S(jn2kb155lwduqcbnjmv34n24))/InternalPage.aspx?Id_Pk=55