ELSS (Equity Linked Savings Scheme) and PPF (Public Provident Fund) are two popular investment options that can help you save tax and reduce your taxable income by up to Rs. 1.5 lakh under section 80C of the Income Tax Act.
When it comes to choosing between ELSS and PPF, it ultimately depends on your investment goals, risk appetite, and time horizon. ELSS may be suitable for investors who are willing to take risks in the hope of higher returns, while PPF may be a better option for those looking for a safe and steady investment.
ELSS
Being an equity fund, the investments are subject to market risks.
Being market-linked, the returns can vary depending on the scheme selected. But an investor can expect 12%-14% returns approximately.
There is a 10% LTCG tax applicable if your returns are over and above 1 lakh after holding period of 1 year.
ELSS investments have a lock-in period of 3 years. However, there is no possibility of premature withdrawal.
PPF
As a Government of India initiative, PPF investments are safe.
The Government declares the rate of interest for PPF investments every year. It is usually between 7% and 8% p.a
EEE (Exempt Exempt Exempt) – The invested amount is exempt from taxes at the time of investment, accumulation, and withdrawal.
Yes, a lock-in period of 15 years applies. (After the 5th year partial withdrawals are permitted)
In conclusion, both ELSS and PPF can help you save tax and reduce your taxable income by up to Rs. 1.5 lakh. However, before investing, it is important to understand your investment goals, risk appetite, and time horizon to make an informed decision.
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