ELSS vs PPF- Which is the Best Option for Investment?


There are various options available in the market that allow one to invest, save and earn interest on the principal amount. Fixed deposits like Paytm Payments bank fixed deposit, recurring deposit account, PPF, SIP, Equity Linked Savings Scheme (ELSS), mutual funds, etc. are a few options to invest in, but, the process to apply for each one of the accounts is a little different from each other.

All the given options are available for the users of any income group to save for the future; however, these options come with their set lock-in period. Only after maturity, the users are given the chance to withdraw the complete amount with earned interest ( T & C apply) on the principal amount.

The options like FD, RD, PPF, SIP, ELSS are different from each other with different sets of features, benefits, limitations and more. Out of the many options available, we will discuss PPF and ELSS and the differences between them in detail.

What is PPF or Public Provident Fund?

PPF or Public Provident Fund is a scheme made for individuals to save a part of their income annually, in order to build post-retirement savings or retirement corpus. The amount deposited into the PPF scheme makes an individual eligible to receive interest on the principal amount with tax-saving benefits too. It was introduced to encourage those individuals who don’t fall under the Employee Provident Fund Organization (EPFO) to save and build a retirement corpus. A tax benefit of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act can be availed through the PPF scheme.

What are the benefits of a PPF account?

Following are the benefits an individual can avail from a PPF account-

  • The interest on PPF balance is compounded on a yearly basis
  • PPF account offers a tax deduction of up to 1.5 lakh
  • PPF lock-in period is 15 years, which makes it a good option to save a good amount of money for a longer period of time
  • Loans can be availed from the PPF account
  • The minimum amount to deposit in a PPF account is Rs. 500 only
  • PPF tenure can be extended in the block of 5 years
  • Partial withdrawal is allowed after the completion of the 6th financial year

Things to take care of when investing in the PPF scheme?

Several numbers of things should be taken into consideration when investing in PPF scheme to avail maximum benefit out of it-

  • PPF account comes with a lock-in period of 15 years
  • Partial withdrawal of the amount can only be taken after the completion of 6 financial year
  • There are certain rules that are required to be followed to partially withdraw the amount from the PPF account
  • PPF account cannot be jointly held
  • The maximum amount an individual can contribute to the PPF account is Rs. 1.5 lakh only
  • Only Indian citizens can open a PPF account, NRIs cannot open a PPF account
  • One cannot close a PPF account within 5 years of opening the account
  • PPF account can only be closed in case of life-threatening ailments that are affecting the account holder, his/her spouse, or children
  • To close the PPF account, supporting documents are required to support life-threatening ailments

Who can open a PPF account?

Listed below are the people who are eligible to open a PPF account-

  • Only Indian citizens are eligible to open a PPF account
  • An Indian citizen settled abroad can continue operating his/her PPF account
  • Parents/guardians on behalf of their minor children can open a PPF account

*It is to be noted that joint accounts and multiple accounts are not allowed to be opened

How to open a PPF account online?

To open a PPF account online, it is important that the individual has an account with the bank and access to internet banking. Following are the steps to follow to open a PPF account; however, it is to be noted that the steps might vary from one bank to another.

  • Log in to the respective bank’s net banking portal
  • Locate the option to open a PPF account
  • If there are options to choose self PPF account or a minor PPF account, choose one accordingly
  • Enter the required details like bank and nominee details
  • Next, enter the amount you wish to deposit in your PPF account
  • Select whether you want the money to be deducted at fixed intervals or at one go
  • Enter the OTP which is sent to your registered mobile number (this step might vary from bank to bank)
  • Once the above-mentioned steps are completed, your PPF account will be created. Note the account number and other required details for future references
  • There are banks that require an individual to submit the physical copies of all the supporting documents and details to be submitted for KYC purpose

How to open a PPF account offline?

It is easy to open a PPF account offline by following the given instructions-

  • Visit your respective bank’s branch
  • Connect with the banking personnel to open a PPF account
  • Next, fill the PPF account opening form
  • Submit all the required supporting documents and the amount for the PPF account
  • Once the verification process is completed, your PPF account will be opened

What is ELSS or Equity Linked Saving Scheme?

Equity Linked Saving Scheme or ELSS is a type of mutual fund scheme. The scheme works by investing in the stock market or equity. An investment of up to Rs. 1.5 lakh is eligible for tax deduction under section 80C of the Income Tax Act. Contrary to PPF, ELSS is a short term savings investment scheme with a lock-in period of 3 years. An individual can sell the scheme only after 3 years from its date of purchase.

To get maximum returns on the ELSS funds, it is always advised to keep the investment intact for the maximum period.

What are the benefits of ELSS?

Following are the benefits of ELSS that makes it one of the choices made by the users-

  • ELSS investors can avail tax deductions of up to Rs. 1.5 lakh in a year under the section 80C of the Income Tax Act
  • There is a short lock-in period of 3 years
  • One can keep the amount invested by not redeeming if after the maturity
  • A minimum of Rs. 500 per month is required to be submitted under the ELSS scheme
  • A user is eligible to receive higher interest from the market as the amount is primarily invested in equities

Things to take care of when investing in the ELSS scheme?

Before investing in an ELSS scheme, it is preferable to first understand the following things-

  • The ELSS scheme comes with a lock-in period of 3 years. It is not possible for one to redeem the amount before the maturity
  • It is advised to choose fund houses that have performed consistently for a longer period of time
  • ELSS is good in case one would want to invest in a scheme that would deliver significant returns in the long run
  • It is one of the best ways to invest in equities
  • There is no limit on the amount to invest

Who can invest in the ELSS scheme?

Following is the list of people who can invest in the ELSS scheme-

  • Salaried professionals who are looking for a safe and reliable investment option
  • If one would want to invest in a low-risk investment option
  • If one would want to diversify the portfolio with some form of tax savings
  • People of any age group can invest in ELSS mutual funds

How to open an ELSS account?

There are two ways to open an ELSS account- Online and Offline. Follow the given instructions to open an ELSS account both ways-

ELSS account online

One can invest in the ELSS scheme by opting for online platforms that allow opening an ELSS account or directly logging into the asset management companies that offer funds.

ELSS account offline

  • Visit the fund house’s branch office or the registrar office
  • Submit the ELSS form and cheque to open an ELSS account


To invest in ELSS, it is mandatory that the applicant must be a KYC compliant

One can invest in ELSS through fund house’s website or aggregators

Once the investment is made, a folio number is provided to the individual

What is the difference between ELSS and PPF?

To choose one among both, it is advised to first know the difference between ELSS and PPF as explained below-

RiskPPF is a government scheme, thus, it is risk-freeELSS is an equity mutual fund and is subject to market risk
ReturnsThe interest rate is decided by the governmentThe returns depend upon the scheme
Lock-in period15 years3 years
Partial withdrawal allowed (before maturity)YesNo
Tax benefitsPPF is exempt from taxes at the time of investment, accumulation and withdrawalELSS is subject to 10% LTCG tax in case the returns are over and above Rs 1 lakh
TenureTenure can be extended in the block of 5 yearsThere are no upper time limits
Amount to depositMinimum amount- Rs. 500 per annumMaximum amount- Rs. 1.5 lakh per annumMinimum amount- Rs. 500 per monthMaximum amount- No limit
Offered byBanks and post officeMutual fund houses

Bottom line

ELSS and PPF, both have their set of advantages, disadvantages, features and tax benefits. A person should choose one according to his/her requirements and the feasibility to invest for a predefined lock-in period.

What is the ELSS lock-in period?
The lock-in period of the ELSS scheme is 3 years.
What is the minimum and maximum amount to invest in ELSS?
The minimum amount to invest in ELSS is Rs. 500 per month, whereas the maximum amount has no limit.
What are the maximum tax benefits under the ELSS scheme?
The maximum tax benefits an individual can avail under the ELSS scheme is Rs. 1.5 lakh per year.
Does ELSS come under section 80C of the Income Tax Act?
Yes, ELSS comes under section 80C of the Income Tax Act.
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