LIC vs PPF

There are different types of investment avenues that have different characteristics as well as risk-return profiles. Market-linked avenues are those which invest in the market and yield non-guaranteed returns while fixed-income avenues are those which do not invest in the market and yield guaranteed returns. Investors who are averse to market risks usually prefer fixed-income avenues and if such avenues offer tax benefits, all the better.

Section 80C of the Income Tax Act, 1961 offers some good investment avenues which offer tax benefits on investments. Two of the most popular avenues under this Section are the PPF scheme and LIC plans. Both these schemes have some similarities as well as differences and you need to know about both before you invest. So, let’s explore –

The PPF scheme

Short for Public Provident Fund, the PPF scheme is a fixed-income long-term saving scheme with fixed interest rates. The scheme helps you accumulate a lump sum corpus by regular investments. Moreover, the scheme allows tax benefits on investments, returns, and the maturity amount.

LIC

LIC is a leading life insurance company that offers a range of insurance plans. LIC plans offer coverage against the risk of premature death. Moreover, many plans also promise a benefit after the completion of the coverage tenure thereby giving returns on investments. 

LIC vs PPF – the similarities

Both PPF and LIC plans have some similarities with each other. These similarities include the following–

  • Investment into both the schemes earns you a tax benefit under Section 80C up to Rs.1.5 lakhs
  • Returns earned from PPF are tax-free. LIC plans also give tax-free death and maturity benefits subject to certain terms and conditions
  • PPF allows partial withdrawals from the 7th year. LIC ULIP plans also allow partial withdrawals from the 5th year onwards
  • PPF allows loans between the 3rd and 6th years. LIC traditional plans also allow loans once the policy acquires a surrender value

PPF vs LIC – the differences

The similarities between the two schemes are limited but the differences are not. Both these schemes are quite different from one another and their differences are mentioned below –

Points of difference  PPF LIC
Eligibility  Resident Indian citizens can opt for the PPF scheme Resident Indian citizens, NRIs and employers can buy a LIC plan
Return  The rate of return on the investment is fixed by the Government. It is also reviewed periodically  LIC traditional plans offer guaranteed death and maturity benefits. If the plans have a bonus component, the rate of bonus is not fixed. It depends on the profit experience  of LIC and is determined by LIC
Nature of investment Fixed-income investment LIC offers both guaranteed saving plans as well as market-linked plans
Death benefit On the death of the depositor, the account balance is paid which is equal to the amount invested and the returns earned thereon On death, a specific death benefit is paid which might be higher than the amount of premium paid towards the plan
Tenure  The scheme runs for 15 years and can be extended in blocks of 5 years after maturity LIC plans have different tenures ranging from 5 years to the whole of life
Deposit amount and tenure You can start a PPF deposit with as little as Rs.100 and there is no maximum limit. At least one deposit is necessary every financial year The premium payable for LIC plans depends on the plan selected. There might or might not be a maximum premium amount. Moreover, the premium can be paid over the duration of the policy that you buy, for a limited period or at once when buying the plan
Maturity benefit  The investments that you have done and the accumulated rate of interest is paid in a lump sum on maturity There is a specific maturity benefit under LIC plans which depend on the type of policy that you buy. Under term plans, there might not be a maturity benefit altogether. Moreover, the maturity benefit can be paid in a lump sum or in instalments under different LIC plans
Market risks Being a fixed income investment avenue, PPF does not face any market risk and give secured returns If you choose unit-linked LIC plans, your investments would be exposed to market risks

 Thus, both the PPF scheme and the LIC scheme are different from one another.

PPF or LIC which is better

Both schemes have their respective pros and cons. You should judge your financial needs before you pick either. The PPF scheme helps you accumulate a guaranteed corpus which is also tax-efficient in nature. In contrast, LIC plans help you provide financial security to your family in case of your premature demise. Thus, the rationale for buying both schemes is different. However, if you are looking from the investment point of view, you can pick PPF for fixed returns or LIC ULIPs for market-linked gains. For fixed returns, you can compare PPF vs LIC Jeevan Labh which is an endowment plan with guaranteed benefits.

Both the schemes help you accumulate a corpus through long-term investments and avail of tax benefits. So, judge your financial needs and then make a choice. You can even choose both avenues for their respective advantages and build up a diversified financial portfolio.

Related Pages:

PPF

SBI PPF Account

PPF Withdrawal

ICICI PPF Account

PPF Balance

HDFC PPF Account

Difference Between EPF And PPF

PNB PPF Account

Difference Between GPF EPF And PPF

Axis Bank PPF Account

PPF Returns

Canara Bank PPF Account

VPF Vs PPF

Bank of India PPF Account

ELSS Vs PPF

Union Bank PPF Account

NPS Vs PPF

IDBI PPF Account

PPF Limits

BOB PPF Account

List of Banks Offering PPF Account

Indian Bank PPF Account

PPF Vs LIC

YES Bank PPF Account

Loan Against PPF Account

Central Bank PPF Account

PPF Interest Rate

Post Office PPF account

PPF Payment Online

Bank of Maharashtra PPF Account

 

PPF Calculator

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ICICI PPF Calculator

IDBI PPF Calculator

YES Bank PPF Calculator

HDFC PPF Calculator

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Bank of India PPF Calculator

Axis Bank PPF Calculator

IOB PPF Calculator

Bank of Maharashtra PPF Calculator

Canara Bank PPF Calculator

Post Office PPF Calculator

Union Bank of India PPF Calculator

Indian Bank PPF Calculator

Kotak Bank PPF Calculator

Central Bank of India PPF Calculator

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