ELSS vs PPF: Before starting investment, it is important to understand which scheme gives what benefits for you. Invest only keeping in mind your financial goals.
ELSS vs PPF: When it comes to saving tax, we often do not understand whether to choose a Traditional Public Provident Fund ie PPF or invest in the stock market through Equity Linked Saving Schemes (ELSS). Let us know what these two ELSS vs PPF- Tax-Saving schemes have to offer you and how to choose the best option for you.Also Read:Delhi News: Electric feeder bus service gifted to the passengers of Delhi Metro, will be able to travel only with smart card
Equity Linked Savings Scheme (ELSS)
What is ELSS:
It is a diversified and open-ended equity mutual fund.
Risks:
It is a high risk investment as the money is invested in equities.
Return:
In this, the returns are different in different schemes. In the last three years, ELSS schemes have given an average return of around 12%.
Lock-in period:
You cannot withdraw money before the completion of 3 years, which is calculated from the date of investment.
Tax Benefits:
A deduction of Rs 1.5 lakh is allowed under section 80C of the Income Tax (I-T) Act. On redemption, long term capital gains exceeding Rs 1 lakh every year will be taxed at the rate of 10% without the benefit of indexation.
Do’s and Don’ts:
Before starting an investment plan, understand that the lock-in period is not calculated from your first installment, but is calculated separately for each instalment.
Public Provident Foundation (PPF)
What is PPF:
This is a government long term investment scheme, which gives tax exemption under section 80C of the Income Tax Act.
Investment Limit:
You can invest up to a maximum of Rs 1.5 lakh in PPF. Minimum investment Rs 500.
Interest:
At present, 7.1% (compounded annual) interest is being available on PPF. An investment of Rs 1.5 lakh every year can give a return of Rs 40.68 lakh at the end of 15 years. In 30 years this amount will increase to Rs 1.5 crore.
Risks:
This is a government guaranteed scheme, so there is no risk involved.
Lock-in period:
The lock-in period for PPF is 15 years. After 15 years, the maturity value is retained, but you cannot make further deposits. You can apply for an extension in a block of 5 years.
withdrawl:
Withdrawal is exempted after six years with certain conditions.
Tax Benefits:
Public Provident fund provides benefits of triple tax. Tax exemption is available under section 80C, interest is also tax free. There is no tax on maturity value also.
Do’s and Don’ts:
If you want to invest in PPF, then you should do it before the 5th of every month. This is because the interest is calculated on the fifth and the minimum balance at the end of the month.
