Equity linked Savings scheme (ELSS) and public provident fund (PPF) are the two highly popular options for tax saving. Armed with several benefits, the schemes get the recommendations from most of the experts as an investment option. As an investor, you might have the curiosity to know about utilities of both the schemes and their usefulness for the purpose of your savings. As you have always thought about returns from both the schemes that could become beneficial for your savings in the long run. There is always the fact about the flexibility of the scheme as an investment option.
Difference between PPF and ELSS
As it is always better to know about the schemes in detail as options for investment, let’s know about them in detail.
Invest your money in ELSS – As an investor, you have every right to know about that where your money would go after you deposit in the ELSS scheme. The money that you invest straight goes to shares in private companies. This is the reason that makes deposits in the ELSS very risky as investments in stock market are subject to tremendous risk.
Invest your money in PPF – When you invest your money in PPF, your money straight goes for further investments in government bonds. Backed by the guarantee for the safety of investment from the government, your money stays safe in this as an investment.
Return from ELSS – When you make your investment in ELSS scheme, your money would go for further investment in shares of private companies. You have the equal chance that you might lose the money completely as stock market goes through fluctuations. But if your luck smiles on you, you would get very good and assured return from your investment in ELSS.
Return from PPF – Interest rate in PPF gets fixed every year. Return from PPF is comparatively lower but it is not subject to any market risk. Investment in PPF brings relatively less returns.
Tax benefit from ELSS – As an investment option, ELSS is tax efficient. It is tax free under Sec 80C of Income-tax. This comes under the EEE category meaning exempt, exempt, and exempt.
Tax benefit under PPF – Like ELSS, Public provident Fund (PPF) is also completely tax free. You would not pay anything at the time of redemption.
Time limit for redemption in ELSS – As an investment option, your money in ELSS would have a lock-in period. It is not permissible for you to withdraw for a period of 3 years.
Time limit for redemption in PPF – Unlike ELSS, your funds have the lock-in period for 15 years. It is not permissible to withdraw funds before 15 years.
Limit of investment in ELSS – The minimum amount of investment in ELSS is Rs 500. There is no maximum limit for investment.
Limit of investment in PPF – You could invest up to 1.5 lakh rupees in PPF scheme. The minimum amount of investment need not be less than 500 rupees.
Which one is better- ELSS or PPF?
For persons, who could take risk, investment in ELSS is a good option. For persons, who avoid risk, PPF is a far better as an investment option.