Master Comparison Table
| Feature | 🛡️ LIC Endowment | 🏦 PPF | 🏧 Bank FD |
|---|
| Returns (approx.) | ~5-6% IRR | ~7.1% ✅ | ~6.5-7.5% |
| Tax on Returns | Tax-Free ✅ | Tax-Free ✅ | Fully Taxable ❌ |
| Section 80C | ✅ Yes | ✅ Yes | Only 5-yr FD |
| Life Insurance | ✅ Yes — built in | ❌ No | ❌ No |
| Lock-in Period | 12-35 years | 15 years | 7 days to 10 yrs ✅ |
| Liquidity | Low ❌ | Medium | High ✅ |
| Risk | Very Low ✅ | Very Low ✅ | Very Low ✅ |
| Max Annual Limit | No limit | ₹1.5L/year | No limit |
| Guaranteed? | SA guaranteed, bonus variable | Govt. backed, rate changes quarterly | Fully guaranteed ✅ |
*Approximate rates. PPF rate as per recent government notification. FD rates vary by bank. LIC returns are approximate IRR based on bonus rates.
Returns Comparison — ₹50,000/Year for 20 Years
Let's see what happens if you invest ₹50,000 per year for 20 years in each:
| Detail | 🛡️ LIC (Endowment) | 🏦 PPF | 🏧 FD (6.5%) |
|---|
| Annual Investment | ₹50,000 | ₹50,000 | ₹50,000 |
| Total Invested (20 yrs) | ₹10,00,000 | ₹10,00,000 | ₹10,00,000 |
| Maturity/Corpus | ~₹17-18L | ~₹24-25L ✅ | ~₹20-21L* |
| Tax on Maturity | ₹0 (tax-free) | ₹0 (tax-free) | ~₹3-4L tax ❌ |
| After-Tax Amount | ~₹17-18L | ~₹24-25L ✅ | ~₹16-17L |
| Life Cover | ₹5-6L cover ✅ | ₹0 | ₹0 |
*Approximate estimates. FD interest taxed at 30% slab assumed. PPF at 7.1% compounded yearly. LIC based on ~5.5% IRR with bonus. Actual amounts will vary.
Key insight: PPF wins on pure returns. But after accounting for tax on FD interest, FD actually gives the lowest after-tax amount. LIC's advantage is the built-in life cover — if you die in year 5, your family gets the full SA + bonus, not just the ₹2.5L you invested.
Tax Treatment — The Real Winner
| Tax Aspect | 🛡️ LIC | 🏦 PPF | 🏧 FD |
|---|
| Investment (80C) | Exempt ✅ | Exempt ✅ | 5-yr FD only |
| Growth/Interest | Exempt ✅ | Exempt ✅ | Taxable ❌ |
| Maturity/Withdrawal | Exempt ✅ | Exempt ✅ | Taxable ❌ |
| Tax Category | EEE ✅ | EEE ✅ | ETE ❌ |
EEE = Exempt-Exempt-Exempt (best). ETE = Exempt-Taxable-Exempt (interest taxed yearly). Both LIC and PPF enjoy EEE status, making them superior to FD for long-term tax-efficient savings. These are approximate tax rules under current law.
When to Choose Which?
🛡️ Choose LIC When:
- You need life insurance + savings in one product
- You want forced disciplined saving (can't skip premiums)
- You want guaranteed maturity with no market risk
- You've already maxed out PPF (₹1.5L/yr limit)
🏦 Choose PPF When:
- You want the highest guaranteed tax-free returns
- You already have term insurance for life cover
- You can commit for 15 years minimum
- You want government-backed safety
🏧 Choose FD When:
- You need high liquidity — break anytime
- You're saving for short-term goals (1-5 years)
- You're a senior citizen (higher FD rates, lower tax)
- You want no lock-in commitment
Best Strategy — Use All Three
🏆 Recommended Portfolio for Salaried Indians
1.Term Insurance — Pure life cover at low cost (₹500/month for ₹1 Crore cover)
2.PPF — Max ₹1.5L/year for tax-free 7.1% returns (best guaranteed instrument)
3.LIC Endowment — Additional guaranteed savings + extra life cover (Jeevan Labh/Anand)
4.Emergency FD — 6 months of expenses in liquid FD for emergencies
5.Equity/MF (optional) — SIP in index funds for long-term growth (10-12% but with risk)
💡 Expert Tip (Haresh Hirapara): Don't think of LIC vs PPF as either-or. Use both! PPF gives the best returns among guaranteed instruments, but it doesn't cover your life. LIC gives slightly lower returns but adds life cover worth lakhs. My recommended split: PPF (₹1.5L) + Term Insurance + LIC Jeevan Labh. Keep an emergency FD of 6 months' expenses. This covers all your bases — guaranteed savings, life cover, and liquidity. Consult a financial advisor for the right allocation based on your income and goals.
Frequently Asked Questions
Which gives better returns — LIC or PPF?+
PPF generally gives better pure returns (~7.1% vs ~5-6% IRR for LIC). Both are tax-free. However, LIC provides life insurance cover which PPF does not. The choice depends on whether you need insurance alongside savings. These are approximate returns.
Is LIC better than bank FD?+
Depends on your needs. LIC has tax-free maturity + life cover. FD has higher liquidity but taxable interest. After tax, LIC often beats FD for long-term savings. For short-term needs, FD is better. These are approximate comparisons.
Should I invest in PPF or LIC?+
Ideally both. PPF for maximum guaranteed returns, LIC for life cover. If only one: choose PPF if you have term insurance, LIC if you need life cover. Best combo: Term Insurance + PPF + LIC Jeevan Labh. Consult a financial advisor.
Are LIC returns tax-free?+
Yes, under Section 10(10D) — if annual premium ≤ 10% of SA. Both premium (80C) and maturity are exempt, making LIC an
EEE investment. This is a significant advantage over FDs. See our
Tax Benefits Guide. These are approximate tax rules.
Can I withdraw from LIC like PPF or FD?+
LIC is the
least liquid. You can take a loan after 3 years but cannot make partial withdrawals. PPF allows partial withdrawal after 7 years. FD can be broken anytime. For liquidity: FD > PPF > LIC. See our
Loan Guide.
What is the best combination for savings?+
Experts recommend: Term Insurance + PPF (₹1.5L/yr) + LIC Endowment + Emergency FD. This covers life cover, guaranteed tax-free returns, additional savings, and liquidity. Add equity SIPs for growth if your risk appetite allows. Consult a financial advisor for personalized allocation.
⚠️ Disclaimer
This article is for educational and informational purposes only. LIC-Calculator.com is not affiliated with LIC of India. Returns, interest rates, and tax treatment are approximate based on publicly available information. PPF rates are set by the government and change quarterly. FD rates vary by bank. LIC returns depend on declared bonus. For official information, visit licindia.in.
This is not financial advice. Please consult a certified financial advisor before making investment decisions.