- By Aditya Pratap Singh
- Tue, 12 Mar 2024 06:12 PM (IST)
- Source:JND
PPF Vs ELSS: A lot of investment instruments are available nowadays, but the Public Provident Fund (PPF) and Equity Linked Saving Schemes (ELSS) are two widely popular investment instruments amongst them. But these two are different i.e. One is a safe investment while investment in the other one is subject to market risk.
Considering the differences, an investor needs to gain insight into both schemes before investing.
Differences between PPF and ELSS
PPF is a government-backed investment scheme. It offers investors guaranteed returns and tax benefits under Section 80C of the Income Tax Act. The interest rate on investment under PPF is decided by the government. ELSS refers to the Equity Linked Savings Scheme and is a type of mutual fund that invests in equities. The returns on investment in ELSS depend on the market performance. Additionally, ELSS also provide income tax benefits to investors.
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Return on investment
The interest rate applicable to PPF is determined by the government every quarter, making it a risk-free investment. However, with ELSS you can invest in equities and get a chance to earn higher returns. Additionally, it also compounds over a longer period.
Maturity
The investment in PPF will mature in 15 years which is quite high. However, Investors get the option of partial withdrawal only after completion of 5 years. While ELSS comes with a lock-in period of 3 years.
Tax benefits
The amount deposited in the PPF account, interest earned and maturity amount are all tax-free under Section 80C of the Income Tax Act. Similarly, ELSS investments up to Rs 1.5 lakh annually are also exempted from tax under Section 80C. However, the returns earned on ELSS investments are tax-free only up to Rs 1 lakh. Returns above Rs 1 lakh are considered long-term capital gains (LTCG) and are taxed at a 10% tax rate.
