Discover the perfect investment that offers both profitable returns and tax savings! With a plethora of options available, two popular choices stand out: Equity Linked Savings Scheme (ELSS) and Public Provident Fund (PPF). ELSS, a tax-saving mutual fund scheme, leverages market performance for potential gains. Meanwhile, PPF, a government-backed savings scheme, paves the way for long-term wealth creation.
In this blog, we’ll break down the differences between PPF and ELSS, making it easy for you to decide which investment option is better for you.
What is the Difference Between ELSS and PPF?
Before you make a choice, it’s essential to understand the contrasts between ELSS and PPF. Let’s break down the key differences between these two investment options:
|Risk||PPF is a government scheme, thus, it is risk-free||ELSS is an equity linked savings scheme mutual fund and is subject to market risk|
|Returns||The interest rate is decided by the government of India||The returns depend upon the market performance of the scheme|
|Lock-in period||15 years||3 years|
|Partial withdrawal allowed (before maturity)||Yes||No|
|Tax benefits||PPF offers tax benefit in EEE format (exempt, exempt, exempt) i.e. the investment made towards the scheme, the interest earned on the invested amount and maturity amount is tax exempted U/S 80C of the IT Act||ELSS is subject to 10% LTCG tax in case the returns are over and above Rs 1 lakh|
|Tenure||Tenure can be extended in the block of 5 years||There are no upper time limits|
|Amount to deposit||Minimum amount- Rs. 500 per annumMaximum amount- Rs. 1.5 lakh per annum||Minimum amount- Rs. 500 per monthMaximum amount- No limit|
|Offered by||Banks and post office||Mutual fund houses|
PPF & ELSS: Which Is Best for Investment?
When deciding between the Public Provident Fund (PPF) and Equity Linked Saving Scheme (ELSS) for investment, it’s essential to consider key factors. PPF is a government-backed, fixed-interest option with a 15-year maturity period and tax benefits under Section 80C. It offers stability and safety. On the other hand, ELSS is an equity-based mutual fund with a 3-year lock-in period, potential for higher returns, and similar tax advantages. ELSS carries market risks and suits individuals with a higher risk appetite and longer investment horizon. The choice depends on risk tolerance, investment horizon, tax planning needs, and diversification goals.
What is PPF?
PPF (Public Provident Fund) is a powerful retirement savings scheme with attractive interest rates and tax benefits. With a 15-year lock-in period, it provides long-term stability for your financial future. You can make partial withdrawals and even avail loans if needed. Whether you’re an Indian citizen, NRI, or a parent/guardian, PPF is a great choice. Learn more about PPF and how it can benefit you. Take charge of your retirement planning today!
What is ELSS?
ELSS (Equity Linked Savings Scheme) is a tax-saving mutual fund scheme that invests in the stock market. It offers tax benefits under Section 80C of the Income Tax Act. With a short lock-in period of 3 years, ELSS provides potential for higher returns. Consider factors like fund performance and investment horizon before investing. Both online and offline methods are available to open an ELSS account. Ensure you are KYC compliant before investing. Read more about ELSS account for better understanding. Start investing in ELSS for potential long-term growth and tax savings.