Both Elss (Equity Linked Saving Scheme) and PPF (Public Provident Fund) are eligible for tax benefits. So, there is always confusion among the investors in choosing one. PPF is a traditionally popular investment option. On the other hand, ELSS is catching up in the modern world due to its higher returns. Here, we will provide an analysis of both schemes to help investors to choose one.
An Overview of ELSS
ELSS is a kind of mutual fund. It offers tax deduction benefits. Its alternate name, “tax-saving funds,” stems from this fact. It offers higher returns and the lowest lock-in period. Many taxpayers have resorted to ELSS schemes in recent years to take advantage of tax benefits.
Up to Rs. 150,000 in tax exemption on the invested amount is available to investors in ELSS schemes. Additionally, any income you receive from this scheme after the three years will be taxed at a rate of 10% (LTCG) if the amount exceeds Rs. 1 lakh.
Key Features of ELSS Insurance Funds
An ELSS fund typically has the following characteristics:
- ELSS offers the highest returns in the tax-saving products category.
- Investors will get tax benefits u/s 80C.
- ELSS comes with a lock-in period of 3 years.
- ELSS funds invest in diverse equities from various sectors.
- It offers market-linked returns.
- There is no entry or exit load for ELSS mutual funds.
An Overview of PPF
The Public Provident Fund is a safe option. It offers a good rate of interest and profits. The PPF lets investors save for retirement by making large contributions over time. You can also start investing in PPF with just Rs 500. PPF also allows you to get Rs. 150,000 in tax exemption under section 80C.
Features of Public Provident Fund
A public provident fund has the following characteristics:
- Creating a PPF account is open to all citizens of India.
- Between the 3rd and 5th years of your PPF account, you can borrow money, and after the 7th year, you can only make partial withdrawals for emergencies.
- You can only nominate someone to hold the PPF accounts; you cannot hold them jointly.
- An annual minimum deposit of Rs. 500 is mandatory.
- A PPF account is among the most popular, secure, and appealing long-term investment options due to India’s government guarantee and unparalleled tax advantages.
Comparative Analysis of ELSS and PPF
| Aspects | ELSS | PPF |
| Returns | High | Moderate – Fixed by Govt every quarter. |
| Lock-in | 3 years | 15 years |
| Liquidity | High (Withdrawal at any time after the lock-in period) | Low (Partial withdrawals after the expiry of 5 years from the account opening year) |
| Tax on Returns | 10% on long-term capital gains. Gains up to 1 lakh exempted. | Exempt |
| Tax on Maturity | Only gains are taxed as shown above | Exempt |
Conclusion
Consider your investment horizon, risk tolerance, and financial objectives before deciding. With an eye toward the future, PPF is the way to go if you highly value security and tax advantages. However, ELSS could be better if you weather market volatility and look for potentially higher returns. If you wish to invest in mutual funds and build your portfolio, then choose Dhan.
The post ELSS vs. PPF: A Comparative Analysis for Tax-Savvy Investors appeared first on MoneyMiniBlog.
This post first appeared on Money And Productivity​. Short, ​Sweet & ​Si, please read the originial post: here
