Building long-term wealth requires more than just disciplined saving — it demands smart planning and the right mix of tax-efficient investment options. For Indian taxpayers, instruments like ELSS, PPF, ULIP and NPS not only help reduce tax liability, but also have the potential to turn regular savings into a substantial corpus over 15–20 years. However, each of these investments comes with different levels of risk, returns, lock-in periods and tax treatments. Understanding these differences is essential for choosing the most rewarding option.

While equity-oriented schemes generally offer higher returns, fixed-income products provide stability. At the same time, tax rules on contribution, growth and withdrawal vary significantly across these products. A clear understanding of these factors helps maximise net returns. Here’s a detailed comparison to help you understand how a monthly investment of ₹12,500 or an annual investment of ₹1.5 lakh can grow across PPF, ELSS, ULIP and NPS.

ELSS (Equity Linked Savings Scheme)

ELSS is a tax-saving mutual fund category that primarily invests in equities. It comes with the shortest lock-in among tax-saving options — just three years. Because returns depend on market performance, ELSS has historically delivered around 12% annualised returns over the long term.

Example Calculation (SIP):

• Monthly SIP: ₹12,500

• Investment Period: 15 years

• Expected Return: 12%

• Total Investment: ₹22,50,000

• Estimated Returns: ₹40,57,199

• Final Corpus: ₹63,07,199

ELSS investments qualify for a deduction of up to ₹1.5 lakh per year under Section 80C. However, long-term capital gains (LTCG) above ₹1.25 lakh in a year become taxable.

PPF (Public Provident Fund)

PPF is one of India’s most trusted government-backed savings schemes. It offers guaranteed returns and complete tax exemptions on investment, interest and maturity under the EEE (Exempt-Exempt-Exempt) category. The lock-in period is 15 years, but the safety level is extremely high.

Example Calculation:

• Annual Investment: ₹1,50,000

• Duration: 15 years

• Interest Rate: 7.1%

• Total Investment: ₹22,50,000

• Total Interest Earned: ₹18,18,209

• Maturity Amount: ₹40,68,209

PPF is ideal for conservative investors looking for assured, tax-free returns without market risk.

ULIP (Unit Linked Insurance Plan)

A ULIP combines life insurance with market-linked investments. Part of the premium is used to provide insurance cover, while the rest is invested in equity or debt funds. While ULIPs can deliver decent returns, various charges — allocation charges, fund management fees, mortality charges — reduce the effective gains.

Example Calculation (Assumed Split):

• Annual Premium: ₹1,35,000

• Duration: 15 years

• Expected Return: 10%

• Total Investment: ₹22,50,000

• Net Invested Amount (after charges): ₹20,25,000

• Estimated Returns: ₹26,93,213

• Final Corpus: ₹47,18,213

For policies issued after February 2021, if annual premium exceeds ₹2.5 lakh, maturity benefits are not tax-free. Premiums up to ₹1.5 lakh still qualify under Section 80C.

NPS (National Pension System)

NPS is a retirement-focused investment that allocates funds across equity, corporate bonds and government securities. On maturity, 60% of the corpus can be withdrawn tax-free, while the remaining 40% must be used to buy an annuity that offers monthly pension.

Example Calculation:

• Annual Contribution: ₹1,50,000

• Duration: 15 years

• Expected Return: 10%

• Total Investment: ₹22,50,000

• Estimated Returns: ₹29,92,459

• Final Corpus: ₹52,42,459

• Tax-Free Lump Sum (60%): approx. ₹31.4 lakh

• Remaining 40% (approx. ₹21 lakh) must be converted into a taxable pension.

Which Option Gives the Highest Wealth and Best Tax Benefit?

• Highest Return Potential:
  ELSS delivers the highest long-term returns, with a 15-year SIP of ₹12,500 growing to over ₹63 lakh.

• Best Tax-Free Benefit:
  PPF remains unmatched for stability and tax-free maturity, though returns are lower than equity options.

• Balanced Retirement Benefit:
  NPS offers solid returns and a structured mix of tax-free lump sum plus pension.

• Insurance + Investment Combo:
  ULIP can work for long-term disciplined investors, but charges reduce overall gains.