Is PPF better than ELSS for tax benefit?

PPF better than ELSS

Every year when it comes to saving tax, most people get confused about which investment would be better. The two most popular options for tax saving are PPF (Public Provident Fund) and ELSS (Equity Linked Savings Scheme) . Both investments provide tax exemption under section 80C, but their working method, returns and risks are completely different from each other.

In this blog, we will explain to you in simple language what is the difference between PPF and ELSS, which one is better, and which one will be right for your needs.

What is PPF?

PPF (Public Provident Fund) is a government scheme, which is specially designed for those people who want safe and guaranteed returns. In this, the government decides the interest rate every quarter, and it is completely safe.

The biggest feature of PPF is that it gives you three types of tax benefits –

  • Tax exemption on investments
  • No tax on interest
  • The entire amount received on maturity is also tax free

However, the lock-in period in PPF is 15 years. This means that your money will be stuck for a long time. After 7 years, some partial withdrawal facility is available, but the full amount is available only after 15 years.

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What is ELSS?

ELSS (Equity Linked Savings Scheme) is a type of mutual fund that invests your money in the stock market. Because of this, there is no guarantee of returns in it, but if you invest for a long time, there is a possibility of good returns.

The biggest feature of ELSS is that the lock-in period is only 3 years. That is, you can withdraw money much sooner than PPF.
Talking about tax exemption, ELSS also gives exemption of up to 1.5 lakhs under section 80C. However, Long Term Capital Gain (LTCG) tax is levied on the profit made in ELSS, which is 10% on gains of more than 1 lakh.

PPF and ELSS – Which one is right for whom?

If you do not want to take risk and safety is of utmost importance to you, then PPF is best for you. It is especially good for those who are planning for retirement or whose priority is safe savings.

If you are ready for a little risk and want higher returns, then ELSS is a better option. It is especially good for the youth, who can invest for a long time and benefit from the growth of the stock market.

Why choose PPF?
  • Absolutely safe investment (Government guaranteed)
  • Get guaranteed returns
  • Entire amount tax free
  • Ideal for retirement funds

Why Choose ELSS?
  • Lock-in period of only 3 years
  • Possibility of better returns in the long run
  • Mutual fund experts manage the money
  • Facility of small investments through SIP
Which is better – PPF or ELSS?

The simple answer is that it depends on your needs and your risk-taking ability.

If you want safety and tax-free returns , choose PPF.
If you want high returns and less lock-in , ELSS is better.
If you want to create a balance, invest a little in both, so that on one hand you get safe returns and on the other hand you also get a chance for more growth.

Finally, an important thing

Investing to save tax is a good thing, but the right investment is the one that matches your goals, risk appetite and investment period
. Both PPF and ELSS are beneficial in their own way, you just need to understand what is your priority – safety or higher returns?


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