PPF vs ELSS, Which is the best tax saving option?

PPF vs ELSS, Which is the best tax saving option?



How ELSS and PPF works under 80C?


The government encourages individuals and households to invest and secure their financial futures by giving tax deductions under Section 80C of the Income Tax Act, 1961. ELSS and PPF are two of the several 80C investments you can make use of as a taxpayer.

This way, you can deduct up to Rs.1.5 lakh(We can get excess deduction of amount 50,000 by investing into NPS) from your taxable income and claim exemptions accordingly.

Both the investment options come with its set of pros and cons and cater to investors of different investment profiles. ELSS vs PPF is a familiar debate in the investment world and let us explore that in detail here.




Lock in Period and Return


ELSS mutual funds invest in equity shares of companies across sectors and market capitalization and have a three-year lock-in. 

It has been observed that over longer periods of 8-10 years, the ELSS yields around 14-15% annualized, without considering the tax exemption under Section 80C of the Income Tax Act

The PPF is 15 year goverement backed saving scheme offered through banks and post offices. Thereafter, it can extended further in batches of five years.

From the seventh year, you can make partial withdrawals from your PPF account.

The interest and maturity proceeds are exempted from tax.The rate of interest on PPF investment is decided by the Government of India with the present rate being 7.9%(not fixed).


Tax on Returns

The returns on PPF investments are totally tax-free.

In ELSS, gains of over INR 1 Lakh are considered long term capital gains and are, therefore, taxed at the rate of 10%.



In both investment options, the contribution can be monthly or in a lump sum.

In PPF, the minimum investment amount is INR 500 and the maximum is INR. 1.5 Lakhs for every financial year.

In ELSS, the monthly payments are known as  Systematic Investment Plans (SIP) in which you can start investing with INR 500 and there is no upper limit of investment. You can also check out the difference between SIP and lump sum mutual fund.









Sarkari CA

Leave a Reply

Your email address will not be published. Required fields are marked *