ELSS vs PPF: Which is a better tax saving investment?


Hi Friends, Today we will talk about an important
topic. ELSS v/s PPF. ELSS means tax-saving mutual fund schemes and PPF means Public Provident
Fund. Both the investment instrument help exempting Rs.1,50,000 from income under section
80c of the Income-tax act. Let us compare these two. ELSS has a lock-in of 3 years whereas
the lock-in period of PPF is 15 years. After 5 to 7 years,  you can withdraw some amount
from it. Otherwise, if we compare like to like, ELSS has a lock-in of 3 years and PPF
has a lock-in of 15 years.PPF is a government-guaranteed scheme. The government discloses the interest
every 3 months. PPF is like a fixed return instrument. ELSS schemes are market-linked
schemes. The money is invested in equity markets, in different sectors, companies of different
market-cap, small and big companies. Investor’s returns are linked to market performance.
In equity markets, the risk is more hence the chances of earning better returns are also
high. This has been seen in the past because of high-risk chances of better returns are
higher if you stay invested for a long duration. PPF is a fixed income instrument backed by the government guarantee hence Investor feels more comfortable to invest in PPF as this is a government-guaranteed scheme. If we look at the risk as a parameter in the PPF v/s ELSS comparison, because of the high risk in
ELSS investors shy away from investing in ELSS. In India, though the number of investments has increased
recently but PPF still enjoys the trust of investors. We believe ELSS and PPF, both are good investment
options. An investor should invest as per their
risk appetite and understanding. ELSS has another feature investing in ELSS SIP route
gives you the advantage of rupee cost averaging. Monthly investment through SIP can be from as low as Rs. 500 to Rs.12,500 for Rs.1,50,000. For an investor, the right mix of equity and
debt is important that’s why you should Take advantage of section 80c by investing in both ELSS and PPF. If you stay invested in both the schemes for the long term. We believe, chances of experiencing better wealth creation would be high because of the growth of equity markets along with tax-savings. Thank you.

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