Understanding ULIP and PPF

The investment market in India has grown exponentially. Today, investment options can be used for financial protection, wealth creation, and to help save tax. Some of the most popular tax-saving investment options available in India are ELSS mutual funds, Unit-Linked Insurance Plan (ULIP), Provident Fund (PF), Public Provident Fund (PPF), and so on.

As an investor, you must consider the different aspects of these investment vehicles before planning your portfolio. In this article, we will discuss the differences between ULIP vs PPF.

What is PPF?

Public Provident Fund, or PPF, is a government scheme launched in the year 1968. It is popular among investors as one of the most stable savings options in India. It offers attractive interest rates and returns that are fully tax exempt.

A few benefits of investing in PPF are as follows:

  • The scheme has a tenor of up to 15 years after which the investor can make tax-free withdrawals

  • It follows the EEE (Exempt-Exempt-Exempt) model of taxation

  • Being a government-backed scheme, investors can be assured for it to be a safe and reliable savings instrument

  • Allows investors to take loans against their PPF account

What is ULIP?

A Unit-Linked Insurance Plan, or ULIP, is a unique offering that allows you to avail the benefits of both investments as well as a life insurance cover under a single plan. A part of the premium paid is used for life coverage, and, at the same time, the rest is invested in different types of market instruments such as bonds, stocks, etc.

Here are the few ULIP benefits of investing in ULIPs are as follows:

  • It provides the dual benefit of investment and life insurance cover

  • Allows investors to achieve their future financial goals easily as the policy provides a five-year lock-in period

  • Allows you to partially withdraw from the investment after completion of the lock-in period

  • It offers several tax benefits under the old and new income tax structure

Difference Between ULIP and PPF

To gain some insight on PPF vs ULIP, you must understand the key differentiating points between the two. The following table gives an elaborate comparison of ULIP vs PPF.


Unit Linked Insurance Plan (ULIP)

Public Provident Fund (PPF)

Investment Focus

It mainly focuses on insurance and building your wealth over time.

It acts more like a post-retirement income.

Lock-In Period

The minimum lock-in period is five years.

However, according to the Insurance Regulatory and Development Authority of India (IRDAI) regulations, if you discontinue the policy before the lock-in period is over, you will have to pay surrender charges, depending on the premium amount.

There is a mandatory lock-in period of 15 years. However, you would be eligible for partial withdrawals from the 7th year.

How Much Can You Invest?

The amount you invest in ULIP depends on your future financial goals.

A minimum investment of ₹500 and a maximum of ₹1.5 lakh can be made towards PPF in a single financial year.


ULIP has multiple predetermined charges.

There are only one-time account opening charges of ₹100.

Tax Benefits

You can avail tax deductions on the premiums paid under Section 80C.

Moreover, the maturity amount is also tax-free under Section 10(10D).

Note: ULIPs issued after February 1, 2021, will be treated as capital gains if the annual premium paid is more than ₹2.5 lakh. Such policies will be taxed at 10% upon maturity

In PPF, an amount of up to ₹1.5 lakh invested in a single financial year can be claimed for deductions under Section 80C of the old income tax structure.


Partial withdrawal is allowed after the completion of the lock-in period.

Partial withdrawal is allowed after completing seven years, and complete withdrawal can be made only after 15 years.

Investment Risk

It depends on the kind of funds you have chosen to invest, whether equity or debt funds.

There is no risk involved as it is a government-backed scheme.

Factors to Consider Before Deciding Between ULIP and PPF

  • Scheme Coverage

As we know, PPF is purely a savings scheme and does not provide any insurance coverage. On the other hand, ULIP offers the benefits of life insurance cover and investment, all under a single policy.

  • Returns

Being a government-backed scheme, PPF is known to provide fixed returns every year. The interest rate is decided by the Indian government at the start of each financial year. Currently, PPF has an interest rate of 7.1% (2021-22).

ULIP, on the other hand, does not offer any fixed interest. The amount you receive as maturity or the death benefit received by your dependents will depend on the market condition at that point. You can use the ULIP calculator available on Finserv MARKETS to get an estimate of ULIP returns on your desired investment.

  • Taxation

Both ULIP and PPF offer similar tax benefits. The amount invested in both these schemes can be claimed for deduction under Section 80C of the old income tax regime. Moreover, the benefits received are tax-free under Section 10(10D) of the Income Tax Act, 1961.

However, please note that ULIPs issued after February 1, 2021, will be treated as capital gains if the annual premium paid is more than ₹2.5 lakh. Such policies will be taxed at 10% upon maturity.

  • Liquidity

When it comes to liquidity, ULIPs have an edge over PPF. The reason being, you can make a partial withdrawal from ULIP after the completion of the five-year lock-in period. However, the same is seven years in PPF. Besides, you can make full withdrawals from your PPF after completing the 15 years.

To Sum It Up!

Although ULIP involves some risk, the policy provides reasonable returns in the long run. Moreover, unlike PPF, ULIP benefits also include life insurance cover along with investment – all under a single plan. If you are still confused, you can seek professional guidance from a financial advisor before making a final decision regarding your investments.

FAQs Related to ULIP vs PPF

  • ✔️What is the interest rate on PPF for 2021-22?

    The interest rate of PPF for the financial year 2021-22 is 7.1%.

  • ✔️Should I invest in ULIP or PPF?

    The answer to whether you should invest in ULIP or PPF should depend on the following factors:

    • Your financial stability

    • Your current expenses

    • Your current income

    • You and your family’s future financial goals

    • Your medical needs

    The answers to these factors will put you in a better position to decide between ULIP vs PPF for your investments.

  • ✔️What is the right time to invest in ULIPs?

    Much like any investment option, any time is a good time to invest in ULIPs. With a ULIP, you get the dual benefit of life insurance coverage as well as market-linked investment.

  • ✔️How can I determine my ULIP returns?

    You can use the ULIP calculator available on Finserv MARKETS to estimate the returns earned over time.

  • ✔️Can ULIPs give high returns?

    ULIP returns depend on the investment component of the policy. You (the policyholder) can choose to invest in equity funds, debt funds, or a combination of the two. The returns solely depend on the market performance of your funds.

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