ELSS vs. PPF: Which Tax-Saving Investment Option is Right for You?

AUTHORSuraj Puneli

Tax planning plays a pivotal role in every individual’s life.

If you are looking for a tax-saving investment option, you may have come across two popular choices: ELSS mutual funds and PPF.

Both the schemes offer tax benefits under Section 80C of the Income Tax Act, of 1961, but they have different features, returns, and risks.

This article compares ELSS and PPF to help you choose the better option for you.

What is ELSS?

The ELSS stands for Equity Linked Savings Scheme.

It`s a type of fund that mainly invests in Equity Segments.

ELSS funds come with a three-year lock-in period, In other words you can`t take out your money before that time. So, This is a suitable investment option for a person with long-term goals.

It also comes with risk but also provides higher returns than other fixed-income instruments.

What is PPF?

The PPF stands for Public Provident Fund.

PPF is a great option for those who don`t like to take risks and the best investment option for long-term goals like education, retirement & other goals.

It is a government-backed savings scheme, You can invest up to Rs 1.5 lakh yearly with a 15-year lock-in period, extendable for 5 more years. The interest rates are currently at 7.1% & revised quarterly.

PPF provides capital safety and early withdrawals are allowed after 5 years.

Features of ELSS:

• – It provides yearly tax deductions of up to Rs. 1.5 lakh under Section 80C.
• – It is characterised by a minimum 3-year lock-in period and at least 80% equity investment.
• – It is known for offering higher returns compared to fixed options like PPF.
• – It involves market risk, with no guaranteed returns; a 10% tax applies to gains over Rs. 1 lakh.
• – It is accessible for investment through lump sum or SIP, offering flexibility with low investment options.
• – It is subject to market risk and volatility; returns are not guaranteed or fixed.

Features of PPF:

• – It provides up to Rs. 1.5 lakh per year tax deductions under Section 80C.
• – It has a long lock-in period of 15 years, extendable by 5 more years, and allows partial withdrawal from the 7th financial year.
• – It offers guaranteed returns since the government fixes the interest rate every quarter.
• – It is a safe investment with no market risk, backed by the government.
• – It is completely tax-free, with both interest and maturity amounts exempt from taxes.

Simple Difference Between ELSS Vs PPF:

Eligibility for ELSS:

ELSS is open to all Indians with a PAN card and a bank account. Non-resident Indians (NRIs) can invest too, following Foreign Exchange Management Act (FEMA) rules. No age or income limits apply. You can invest in ELSS with a lump sum or through SIP.

Eligibility for PPF:

PPF is available for all Indian residents with valid ID and a bank account, but NRIs and HUFs can`t open one.

You can open just one PPF account, either in a post office or a bank. If you open an account for a minor child, the total annual limit is Rs. 1.5 lakh for both accounts.

How to Invest in ELSS and PPF:

Investing in ELSS and PPF is easy. ELSS, like a mutual fund, helps you save on taxes. Many wealth management companies offer ELSS schemes. You can also contact us for more info.

PPF accounts, provided by banks, can be opened where you have your savings account.

Whether you go for ELSS or PPF, check out different schemes, assess your financial goals, and make smart investment choices accordingly.

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We are your all-in-one investment solution. Choose JK Securities as your reliable partner for investments.

Conclusion:

As you know ELSS and PPF save taxes differently.

ELSS funds come with a three-year lock-in period, whereas PPF comes with a 15-year lock-in period. PPF is safer than ELSS for long-term savings.

A wise choice is to mix both for the best results. Taxes can reduce your income, so pick ELSS if you`re okay with the risk for long-term wealth.

Seek expert advice before investing and Consider risks before deciding. Contact us now for more info.

You can open just one PPF account, either in a post office or a bank.