ELSS vs PPF: Who is the real financial hero in tax savings and returns? Know the most profitable investment!

If you want your money to grow and also have to pay less tax, then you need an investment that does both things simultaneously. There are many such schemes available in the market, but ELSS (Equity Linked Savings Scheme) and PPF (Public Provident Fund) are the most popular. Now the question arises - which of these schemes is right for you? For this you have to know what is the difference between these two, in which more returns can be expected, in which there is less risk and in which there will be more tax savings. When you understand these things, then you will be able to choose the right option according to your need and risk taking capacity. So let's know who is the real hero of your financial future in the real battle between ELSS and PPF!

What are ELSS funds in mutual funds?

ELSS i.e. Equity Linked Savings Scheme is a special category of mutual fund which gives an opportunity to save tax as well as the possibility of good returns in the long term. This scheme is offered by mutual fund houses and asset management companies (AMCs). Most of the money of this fund is invested in the stock market i.e. equity or equity related instruments. However, a small part of it is also invested in other securities so that the risk can be balanced a little.

The special thing about ELSS fund is that it has a lock-in period of 3 years. That is, once you invest money in it, you can neither withdraw nor sell it for the next 3 years. The special thing about ELSS fund is that it has a lock-in period of 3 years. That is, once you invest money in it, you can neither withdraw nor sell it for the next 3 years. Because this fund is linked to the stock market, its return depends on the market movement and the performance of the companies involved in it. If the market performs well, then those who invest in it can get better returns. So if you want to save tax and earn more returns by taking a little risk, then ELSS can be a good option for you.

What is PPF?

If you are looking for a scheme in which your money is safe, you get good interest and you also save tax - then PPF i.e. Public Provident Fund can be a great option for you. This is a government savings scheme, in which you can deposit a little money every year. In this, you can invest a minimum of ₹ 500 and a maximum of ₹ 1.5 lakh in a year. The special thing about PPF is that it has a lock-in period of up to 15 years. That is, the money you have invested cannot be withdrawn for 15 years. However, after 5 years you can withdraw a little money if needed. And after completion of 15 years, if you want, you can also extend it for a period of 5-5 years. The best thing is that both the interest and maturity amount received on PPF are tax-free, and tax exemption is also available under section 80C.

Scheme Type

ELSS: This is a mutual fund scheme in which most of the money is invested in investments related to the stock market (equity). It is run by asset management companies (AMC) and mutual fund houses.

PPF: This is a savings scheme that you can open in a bank or post office. In this, money is deposited at regular intervals and savings are made with interest.

How to invest

ELSS: You have to invest in ELSS mutual fund through a mutual fund company or broker.

PPF: You have to open a PPF account in a bank, post office or some NBFCs. In this, you can deposit money every year or month.

Minimum Investment

ELSS: You can start with ₹500 per month through SIP (Systematic Investment Plan).

PPF: You can start investing in it with a minimum of ₹500 per year. The maximum investment limit is ₹1.5 lakh per year.

Lock-in Period

ELSS: It has a lock-in period of 3 years. After that you can withdraw money or continue investing.

PPF: It has a lock-in period of 15 years. After this, if you want, you can extend it in a period of 5-5 years.

Tax Benefit

ELSS: Under Section 80C, tax exemption of up to ₹1.5 lakh is available. But if the annual profit is more than ₹1 lakh, then LTCG tax (Long Term Capital Gain Tax) is levied on it.

PPF: In this, investment, interest and maturity all three are completely tax free. In this also, exemption of up to ₹ 1.5 lakh is available under section 80C.

Risk level

ELSS: Since it is linked to the stock market, there is a risk in it. The return depends on the movement of the market.

PPF: Being a government scheme, it is completely safe. There is no risk on investment in it.

Return potential

ELSS: It is market based and usually 12% to 14% annual return can be expected.

PPF: It comes with a fixed interest rate, which is fixed by the government every 3 months.

Service Provider

ELSS: This is provided by mutual fund companies and asset management companies (AMC).

PPF: You can open a PPF account in a bank, post office or some NBFCs.

Withdrawal facility

ELSS: Withdrawal before 3 years is not allowed. After that you can redeem the funds.

PPF: You can make partial withdrawal from PPF account after 5 years under certain conditions.

ELSS vs PPF: Which is better for you?

If you want to save tax and also want to get good returns by investing your money in the right place, then both ELSS and PPF are good options. ELSS is a mutual fund scheme which is linked to the stock market and you get tax exemption on investing in it, but its return depends on the performance of the stock market and the risk is a little higher. On the other hand, PPF is a government saving scheme in which your money is safe and the interest is also fixed, as well as the amount received on maturity is completely tax free. In ELSS, you can withdraw money after 3 years, while PPF has a lock-in period of 15 years. If you can take risk and want better returns, then you can choose ELSS, but if you want safe and tax free savings without any risk, then PPF is a better option for you.