ULIP vs PPF: Key Differences

Invest ₹15K/Month & get ₹4.04Cr^{^1d} Now!

ULIP and PPF are popular investment options for long-term savings. ULIPs are market-linked plans that combine the benefits of investment and life insurance. PPF, on the other hand, is a government-backed investment scheme that offers guaranteed returns. Both these investment options have their specific merits and demerits that can affect your short-term and long-term goals. show less ...Read More

Tax Savings

upto Rs 46,800^~#

Midcap

Momentum Index Fund^{^1d}

17+ Funds

Options

Unlimited Free

Fund Switches

Invest ₹15K/Month & get ₹4.04Cr^{^1d} Now!

Axis Max Life Savings Plans

Trust of 20+ Years in Industry

Written bySumit Narula

Investment Writer

Reviewed byKumar Himanshu

Last Modified 29th October 2026

Investment Expert

ULIP Calculator Save tax with ULIP Investment Calculator Investment Plans

What is ULIP (Unit Linked Insurance Plan)?

A Unit-Linked Insurance Plan (ULIP) is a financial product that combines the benefits of life insurance cover and investment in one plan. When you buy a ULIP, a portion of your premium is paid as your life insurance premium. The rest is invested in debt, equity, or balanced funds. You can keep your funds balanced through ULIPs with equity and debt components.

The returns from ULIPs are market-linked, so your investment involves market-related risks. In ULIPs, there’s also the option to switch between funds depending on the market performance.

ULIPs have a mandatory lock-in of 5 years. However, you can make two partial withdrawals after the lock-in period is over. However, you cannot withdraw funds during discontinuance and settlement periods.

A ULIP can act as a retirement plan, as it helps you build a corpus in the long-term. Further, you can use it as an instrument to save for higher education. Besides, it’s suitable if you want to build wealth to buy a house. You can decide which long-term goal you want to fulfill through ULIPs.

What is PPF (Public Provident Fund)?

Now, let’s answer the question, “What is PPF?” Public Provident Fund (PPF) is a government-backed savings scheme. It offers guaranteed returns at a fixed interest rate, which is currently 7.1% p.a. (as of Q1FY26-27). In PPF, the lock-in period is 15 years. Post that, the investment period can be extended in blocks of 5 years.

PPF falls under the Exempt-Exempt-Exempt (EEE) category. It offers triple tax benefits to investors in India. First, the principal you invest is exempt from income tax under Section 123 of the Income Tax Act, 2025. This reduces your annual taxable income. Next, the interest you earn on the investment is also tax-free. Finally, you withdraw the funds on maturity without any taxes applicable. This ensures tax efficient returns on your investment.

We’ve discussed some of the most common features of PPF below:

Interest rate (as of Q1 FY 2026-27)	7.1% p.a.
Minimum investment in a tax year	₹500
Maximum investment allowed in a tax year	₹1.5 lakh
Maturity period	15 years
Risk	Offers guaranteed and risk-free returns
Tax benefit on contribution*	Up to ₹1.5 lakh u/s 80C of the Income Tax Act, 1961 (Section 123 of Income Tax Act, 2025)
Available at	Banks and Post Offices

Note: *Only applicable under the old tax regime

Difference Between ULIP and PPF: A Detailed Comparison

Both ULIP and PPF facilitate long-term investments. However, you should be aware of the differences between the two if you are planning to start an investment. This will help you decide which one suits you the best.

We’ve discussed the difference between PPF and ULIP below:

Parameter	PPF	ULIP
Nature	Secure investment option	Market-linked option that combines the benefits of investment and life insurance
Returns	Guaranteed returns	Market-linked returns
Risk	Low risk	High risk
Lock-in Period	15 years	5 years
Minimum Investment (in a tax year)	₹500	₹1000 to ₹1500
Maximum Investment allowed (in a tax year)	₹1.5 lakh	No upper limit
Charges	You need to pay ₹100 at the time of opening the PPF account	You may have to incur several charges such as guarantee charges, mortality charges, premium allocation charges, and fund management charge
Insurance Cover	This is an investment option that doesn’t provide life insurance cover	This is an investment plan that includes the benefits of life insurance cover
Taxation	The principal, interest, and returns are exempted from all taxes under section 80C of the Income Tax Act, 1961(Section 123 of the Income Tax Act, 2025). However, this is applicable only under the old tax regime	Death benefits are tax-exempt under Section 10(10D), and the premiums are eligible for deduction u/s 80C of the Income Tax Act,1961 (Section 123 of the Income Tax Act, 2025), up to ₹1.5 lakh
Withdrawal Rules	Partial withdrawals are possible after 5 years (up to 50% of the PPF balance at the end of the 4th year)	Partial withdrawals are possible after 5 years
Loan Facility	You can take loans from the 3rd to the 6th year	You can take loans after the policy accumulates the surrender value
Life Cover	No	Yes
Regulator	Ministry of Finance, Government of India	Insurance Regulatory and Development Authority
Investment Flexibility	Fixed tenure that promotes disciplined long-term savings	Greater flexibility, allowing policyholders to switch funds and alter investment strategies

Wealth Growth Projection: PPF vs ULIP

ULIP and PPF are relevant investment methods for wealth growth. Further, the returns in PPF are guaranteed, whereas in ULIPs, they are market-linked.

Comparison of growth of capital PPF vs ULIP

Assumptions:

Annual Investment = ₹1.5 lakh
ROI of ULIP = 12% p.a., assuming 2% charges, net returns of 10% p.a.
ROI of PPF = 7.1% p.a.

Investment Period (in years)	Total Amount Invested (in lakh)	Growth of ULIP Investment (in lakh)	Growth of PPF Investment (in lakh)
5	7.5	9.65	8.97
10	15	25.18	21.61
15	22.5	50.20	39.43
20	30	90.49	64.53
25	37.5	155.39	99.91

We can see that the difference in wealth growth is not massive in 5 years. However, by the end of 25 years, the wealth growth of ULIP is 1.5x the PPF through the power of compounding.

Tax Benefits: ULIP vs PPF Under Section 80C and Beyond

Both ULIP and PPF qualify for tax deductions under section 80C of the Income Tax Act, 1961 (Section 123 of Income Tax Act, 2025. PPF falls under the Exempt-Exempt-Exempt (EEE) category. This means that the principal (up to ₹1.5 lakh), interest, and returns are all exempt from taxes.

In case of ULIPs, before February 1, 2021, the returns you received on the maturity were tax-free under Section 10(10D) of the Income-tax Act, 1961, provided cumulated premiums paid were not more than 10% of the sum assured. You could also claim a tax deduction under Section 80C. However, the Finance Act, 2021 made amendments to Section 10(10D).

Now, if the cumulated premium paid exceeds ₹2.5 lakh, there will be no tax exemption. Moreover, the amount received at maturity, including any bonus, will be taxable.

ULIP vs PPF: Under Old and New Tax Regime

The old and new tax regimes apply differently to types of investment plans. For example, the tax saving benefits under section 80C of the Income Tax Act, 1961 are not available in the new tax regime. As a result, under the new tax regime, both ULIP and PPF lose tax benefit on premiums paid.

However, the amount you receive on the maturity of your PPF account is tax-free under both regimes. Similarly, tax benefits on ULIP maturity under section 10(10D) are applicable under both tax regimes.

On analysing both tax regimes, we understand that while the old tax regime can be more beneficial for some. After reaching certain income threshold, it is better to switch to the new tax regime. You can avail the tax benefits against premiums paid for both ULIP and PPF on maturity under the new tax regime.

Risk Comparison: ULIP vs PPF

When we talk about risk while comparing ULIP vs PPF, the answer is simple. PPF is a government-backed scheme with zero risks. PPF comes under secure investments where you receive guaranteed returns on maturity.

As ULIPs are market-linked instruments, the returns are not guaranteed. However, you can manage the risk by switching between funds. Equity funds are high-risk assets; therefore, there’s also the potential for high returns. Similarly, there’s moderate risk in debt funds, which is why the returns will potentially be moderate. Investing in balanced funds helps you focus on capital growth and stability.

ULIP Charges vs PPF Charges: Hidden Cost Comparison

You need to pay ₹100 at the time of opening a PPF account. That’s the only charge involved in PPF. Then, you can proceed with your investments to build a corpus for your long-term goals like retirement planning.

ULIPs, on the other hand, contain several charges or hidden costs. We have listed some of these charges below:

Charge	Meaning
Premium Allocation Charge	Fees deducted upfront from the premium before investment (Around 2-5% of the premium)
Fund Management Charge	This is a fee deducted from your fund value to manage your ULIP funds (Usually 1-1.35% of the fund value)
Mortality Charge	It’s a fee used to provide life cover, varying on the basis of age and sum assured
Policy Admin Charge	This is a fee collected by the insurer to cover ongoing administrative expenses to maintain your policy (Ranges between ₹200 and 500 per month). Changes to the policy administration charge need prior approval from IRDAI.
Fund Switching Charge	It’s a charge you need to pay if you switch between funds beyond the free limit

ULIP charges have a direct impact on the growth of your investment. It means that higher ULIP charges decrease the net investment returns, especially in the initial years. However, the impact of ULIP charges becomes stable over time, as investments continue to grow.

The impact of modern ULIP charges is low. It’s because they are investor-friendly, offering lower rates and better transparency. Besides, government regulations ensure the implementation of specified limits on ULIP charges to avoid excessive fees.

Lock-in Period and Liquidity: ULIP vs PPF

When you choose an investment plan , you should be aware of the lock-in period and liquidity. This will help you understand how easily you can access your funds. We’ve discussed the lock-in period and liquidity for ULIP vs PPF in detail below:

For PPF, the lock-in period or initial maturity period is 15 years. However, partial withdrawals are allowed after the account has been active for at least 7 years. The maximum withdrawal amount is decided two ways. The amount can be:

50% of the funds at the end of the fourth year before the withdrawal year, or
50% of the amount at the end of the year before the withdrawal year, whichever is lower

ULIPs come with a mandatory 5-year lock-in period. Partial withdrawals are allowed only after the completion of this duration. However, the maximum withdrawal in a policy year cannot be more than 20% of the total fund value.

ULIPs and PPFs are not considered highly liquid investment plans because you cannot access the money easily. You need to wait for a certain period before you begin your withdrawals.

Loan Against PPF vs Loan Against ULIP

Both PPFs and ULIPs offer loan facilities. This provides a financial safety net for policyholders. As a PPF account holder, you can apply for a loan from the 3rd to the 6th year. The loan amount is capped at 25% of the account's balance. It is calculated based on the balance at the end of the second year before the year of application.

You need to pay 1 percent interest per annum, if you repay the loan within 36 months. In case the repayment period exceeds 36 months, the rate of interest increases to 6 percent per annum. The higher rate is applicable from the date of loan disbursement. This makes payment delay an expensive affair.

You can apply for a loan against ULIP after the completion of the 5-year lock-in period. The loan limit typically ranges from 50% to 90% of the policy’s surrender value.

The interest rate varies from 8% to 12% p.a. You can choose when you want to repay the amount. Further, you can also choose between paying the principal with interest or only the interest.

Investment Flexibility: Fund Switching in ULIP vs Fixed PPF

With ULIP, you can switch between debt, equity, and balanced funds. The funds you choose should be based on your current financial situation and financial goals. If equity funds aren’t performing well, you can switch to debt funds to protect your capital. On the other hand, you can switch from debt to equity to capitalise potential growth during a market upswing.

In PPF, there’s no investment choice. The PPF interest rate is fixed by the government and is compounded annually.

As a result, the returns are guaranteed and stable.

Life Insurance Cover: ULIP Advantage Over PPF

Best ULIP plans come with a built-in life cover. A portion of the premium you pay is used to provide you with a life insurance cover. The sum assured is given to your beneficiaries in the event of your unfortunate death during the policy period.

The sum assured is determined when you buy the policy. It depends on factors like your age, premium amount, and chosen coverage. The death benefit can also be more than the sum assured or fund value, depending on the market performance.

PPF, on the other hand, is solely an investment scheme. It doesn’t include any life insurance benefits. You need a separate term plan to avail life insurance cover.

Which is Better: ULIP or PPF? Goal-Based Suitability Guide

Whether you should choose ULIP or PPF depends on your age and financial goal. If you’re a young investor in your 20’s, looking to grow your wealth, you can choose ULIP. However, if you’re in your 40’s and want to build a retirement corpus, you can choose PPF. It’s a safe option that offers guaranteed returns.

ULIPs can also be a suitable option for retirement planning, as they potentially provide higher returns. Similarly, if you want to save for your child’s education, you can consider both options. Let’s assume that you have an investment horizon of 15+ years to fulfill this goal. You can rely on PPF for guaranteed returns and utilise ULIP for wealth growth.

However, if you want to build an emergency fund, avoid investing in a ULIP or PPF account. This is because you do not have the flexibility to withdraw funds in case of an emergency.

Note: Both ULIP and PPF offer tax benefits under the old tax regime. Tax deductions are applicable under section 80 C of the Income Tax Act, 1961 (Section 123 of the Income Tax Act, 2025).

Can You Invest in Both ULIP and PPF?

Yes, you can invest in both ULIP and PPF. While ULIP helps in wealth creation, PPF focuses on capital preservation. So, combining the two helps you grow your money and protects your capital.

Here are a few optimal allocation strategies you can follow:

i. Conservative: 70% PPF + 30% ULIP

ii. Moderate: 50% each

iii. Aggressive: 30% PPF + 70% ULIP

ULIP vs PPF for NRIs: Eligibility and Rules

As per the new PPF rules, NRIs cannot open new PPF accounts. Only the accounts they opened when they were Indian residents can continue to receive contributions till the maturity. Unlike Indian citizens, they cannot extend the policy duration in blocks of 5 years.

According to the Foreign Exchange Management Act (FEMA), NRIs can invest in ULIP plans in India. They can compare different ULIP plans and choose one that meets their requirements. After that, they need to fill a basic application form and provide necessary supporting documents.

NRIs can benefit from the tax benefits under Section 80 C. They can also gain additional tax exemptions on purchasing a ULIP from GIFT City (Gujarat International Finance Tec-City). They will benefit from tax exemptions under Section 10(10D), even if their annual premium exceeds the ₹2.5 lakhs!

Common Mistakes to Avoid When Choosing Between ULIP and PPF

PPF and ULIP are both reliable investment options. However, be careful while making the right investment choice. Thus, you should avoid the following mistakes:

Ignoring ULIP charges impact on net returns
- Since ULIPs are a combination of investment and life insurance, certain fees and charges are levied, along with the premium you pay. When you choose your preferred ULIP, it’s important to consider such charges while you calculate your total outgo.
Comparing raw ULIP returns to PPF without accounting for charges
- As discussed above, the ULIP charges reduce its net yield. However, in PPF, the returns are guaranteed, and there are no major charges. Hence, comparing the returns of ULIP and PPF might not give accurate results.
Surrendering ULIP before 5 years
- If you surrender ULIP before 5 years, insurers deduct discontinuation charges from the accumulated amount in your policy. These charges are typically a percentage of the premiums you have paid. Due to the premature surrendering, the surrender value received is added to your income and taxed as per your income tax slab rate. A Tax Deducted at Source (TDS) can also be applied.
Not considering PPF 15-year lock-in impact on liquidity
- Though PPF is a secure investment option, it restricts liquidity. You can go for partial withdrawals only after 6 years. Don’t forget to consider this aspect of the investment option before making a choice.
Choosing based on only tax benefits without matching goals
- While both PPF and ULIPs offer tax benefits, you should ensure that your investments align with your goals. It’s not a wise decision to invest simply to avail of tax benefits.

FAQs for PPF vs ULIP

What is the main difference between ULIP and PPF?

ULIP is a market-linked product that combines the benefits of life insurance and investment. PPF is a secure government-backed investment scheme that provides guaranteed returns. This main difference between ULIP and PPF is that the former provided market-linked returns and the latter provides guaranteed returns.

Which is better for tax saving - ULIP or PPF?

Both ULIP and PPF offer tax benefits under Section 80C of the Income Tax Act, 1961 (Section 123 of Income Tax Act, 2025). That is, the principal is tax exempt up to ₹1.5 lakh. Further, PPF follows the EEE scheme where the principal, interest, and returns are exempt from taxes.

Is ULIP better than PPF for long-term investment?

Both ULIP and PPF are ideal options for long-term investment. However, ULIP is a market-linked instrument. The returns depend on market performance. PPF, on the other hand, is a secure government-backed scheme that offers guaranteed returns.

What are the charges in ULIP compared to PPF?

PPF only charges ₹100 when you open the account. In ULIPs, there are several charges applicable, including premium allocation charge, fund management charge, mortality charge, and policy admin charge.

Can NRIs invest in ULIP and PPF?

NRIs can invest in ULIP. However, they cannot open a new PPF account. They can only continue investing in their existing PPF account till it reaches its initial maturity period.

What is the lock-in period for ULIP vs PPF?

The lock-in period for ULIP is 5 years, whereas for PPF, it is 15 years.

How much can I invest in ULIP vs PPF per year?

You can invest up to ₹1.5 lakh per year in PPF. There is no maximum investment limit in ULIP.

Is PPF interest rate fixed or does it change?

The PPF interest rate is revised in every quarter. As of Q1 FY 26-27, the interest rate is 7.1% p.a.

Can I withdraw money from ULIP and PPF before maturity?

Partial withdrawals from ULIP are allowed only after the mandatory 5-year lock-in period. In PPF, you can start partial withdrawal from the 6th year onwards (subject to a valid condition).

Does PPF provide life insurance like ULIP?

No, PPF is an investment option and doesn’t provide life insurance cover like ULIP does.

Can I invest in both ULIP and PPF simultaneously?

Yes, you can invest in ULIP and PPF simultaneously. You can invest partially in ULIP and partially in PPF. This way, you can focus on both wealth creation and safeguarding your money.

What happens to PPF and ULIP if the investor dies?

In case of ULIP, after the investor dies, the nominee or beneficiary receives the promised benefits. In case of PPF, the nominee claims the money.

Is ULIP maturity taxable while PPF is tax-free?

While PPF is tax-free, ULIP maturity is tax-free only if the aggregated annual premium is less than ₹2.5 lakh.

Which gives higher returns after 15 years - ULIP or PPF?

Both ULIP and PPF can give high returns after 15 years. However, the returns you receive from ULIP are market-linked. On the other hand, the returns from PPF are guaranteed.

Can I take a loan against my PPF or ULIP?

Yes, you can take loan against both PPF and ULIP. In PPF, you can take a loan from the 3rd to the 6th year. However, you can take a loan against ULIP only after the policy has accrued a surrender value.

ARN: Apr26/Bg/10DB

Sources:

https://cleartax.in/s/ppf

https://cleartax.in/s/unit-linked-insurance-plan-taxation-rules

https://www.axismaxlife.com/blog/investments/ulip-charges

Share your Valuable Feedback

4.5

Rated by 1639 customers

Was the Information Helpful?

Very Good