Last updated on November 8th, 2025 at 10:38 am
Choosing an appropriate investment plan is important to achieve long-term financial objectives when it comes to financial planning. The two most popular options available are: Unit Linked Insurance Plans (ULIPs) & Public Provident Fund (PPF). Though both plans have different financial goals, they serve towards wealth accumulation. On one hand &, ULIPS include a combination of insurance & investments offering returns linked to the market. PPFs, on the other hand, are government-backed schemes which offer low risk at fixed returns.
What is ULIP?
ULIP Plan offers a dual benefit of insurance & investments, where a part of the premium is allocated towards life insurance & the remaining part is invested in market-linked securities. In case of a sudden demise of the policyholder, the beneficiaries will receive the death benefit or the fund value, whichever is higher. In case the policyholder survives the policy, the policyholder will receive the fund value that would have been accumulated, depending on the fund’s performance.
What is PPF?
A Public Provident Fund is a type of long-term investment plan backed by the government of India, offering attractive interest rates along with returns. The amount to be deposited in the fund ranges from INR 500 to INR 1,50,000 per financial year, either in equal monthly instalments (EMIs) or a lump sum. The amount deposited, maturity amount & interest amount are totally exempt from taxes. It offers secure & stable returns as they are not market-linked. It includes a fixed tenure of 15 years to invest funds, make disciplined savings, & offer an option to withdraw the funds once the 5-year period has been completed.
Difference between ULIP & PPF
Provided are the differences between ULIP & PPF:
| Point of Difference | ULIP | PPF |
| Investment Amount | There is no range for the amount to be invested in ULIP; any amount of your choice can be invested, depending on your financial objectives. | The minimum amount to be invested in PPF is INR 500. The maximum amount that can be invested is INR 1.5 lakhs per annum. |
| Investment Purpose | The main objective of this plan is to provide financial protection with wealth creation. | It comes with a main objective to offer an income source post-retirement. |
| Lock-in Period | The minimum lock-in period under this plan is 5 years. | The minimum lock-in period under this plan is 15 years. |
| Partial Withdrawal | It allows withdrawal of funds partially once the period of 5 years has been completed from the investment date. | It allows withdrawal of funds partially once the period of 7 years has been completed from the investment date. |
| Associated Fees & Charges | There are many different charges applicable. | Only INR 100 as a one-time fee is applicable here under this plan. |
| Withdrawals | There are no charges on withdrawals once the lock-in period has been met. | It allows a partial withdrawal from the 7th year & a complete withdrawal of funds from the 15th year. |
| Tax Benefits | It allows a tax deduction on the amount of premium paid u/s 80C. The maturity benefits are exempt from tax u/s 10(10D) of the Income Tax Act, 1961. | It allows a tax deduction on the amount of premium paid u/s 80C of the Income Tax Act, 1961. |
| Investment Risk | Depending on the type of fund in which the investment has been made. | No risk, as it is backed by the government of India. |
Which is Better – ULIP or PPF?
To decide between a Best Savings Plan between ULIP & PPF, the following are the parameters to be considered:
- Returns on Investment:
An insurance provider company decides upon the rate of premium for ULIPs, though the returns on the investment made by you are linked to the market.
As PPF is backed by the Government of India, the interest rates are decided by it only, hence remaining fixed every year.
- Financial Coverage:
Under ULIP, you get financial security against any unforeseen event along with the growth of wealth as funds are invested in markets.
Under PPF, you can only save funds but cannot utilise those funds in case of any unforeseen circumstances.
- Liquidity:
Under ULIP, it allows withdrawals once the lock-in period of 5 years has been met.
Under PPF, it allows a partial withdrawal of funds after 7 years & complete withdrawals after 15 years.
- Tax Benefits:
Under ULIP, the premium paid is eligible for a tax deduction u/s 80C, subject to a maximum of up to INR 1.5 lakhs. The maturity amount is exempt from tax u/s 10(10D), subject to certain terms & conditions. The premium amount should not be more than 10% of the sum assured in case of ULIPs issued before 2012. & for ULIPs issued on or after April 2012, the premium paid should be 10 or 20% of the sum assured.
Under PPF, the premium paid is eligible for a tax deduction u/s 80C, subject to a maximum of up to INR 1.5 lakhs. The interest earned & maturity amount are exempt from tax u/s 10(11).
Which Plan to Choose – ULIP or PPF?
The decision to choose between ULIP & PPF depends on financial objectives, risk tolerance level & investment horizon.
- Choose ULIP if:
- You want dual benefits of insurance & investments.
- You are willing to take risks for higher returns.
- You are willing to invest in market-linked securities.
- You have medium to long-term financial objectives.
- Choose PPF if:
- You want assured & secured returns.
- You are a risk-averse investor, i.e. not willing to accept risk.
- You have long-term financial objectives.
- You prefer a simple-to-understand financial plan which is not linked to the market.
Conclusion
Both ULIPs & PPFs are tax-saving investment plans, but which one to choose will depend on your financial objectives, risk tolerance level, & your choice. PPF is backed by the Indian government, offering a limited withdrawal facility, a fixed rate of interest, & a longer lock-in period; hence, it is considered to offer consistency in long-term savings. On the contrary, if individuals want higher returns & are willing to accept high risks over a longer duration, ULIPs are the best solution. Under this plan, funds are invested in equity, offering flexibility according to market fluctuations & risk tolerance level.
