ELSS vs Other Tax Saving Schemes – Which One Secures Your Future Best?


  • ELSS packs more punch than other tax saving products owing to more returns
  • ELSS comes with no investment cap as opposed to competing products that allow deposits of up to ₹1.5 lakh a year

Financial planning for the future can be one heck of a task considering the numerous ups and downs that are parts and parcel of one’s life. Keeping in mind the unforeseen challenges ahead, you should look to keep money in financial instruments that could generate substantial returns to enable a smooth ride. But, good returns alone can’t pave it for you. Yes, you read it right! The investments you make have to be tax-friendly at the same time so as to generate maximum corpus.

There are products such as Equity-linked Savings Scheme (ELSS), Public Provident Fund (PPF), Tax-saver Bank Fixed Deposit, National Savings Certificate (NSC) you could invest in to meet the purpose of returns and tax benefits. All these products offer income tax benefits under Section 80C of the Income Tax Act.

You should, therefore, compare these investments and choose one with maximum benefits on offer. Let’s head straight to the table below showing the comparison of the products offering income tax benefits under Section 80C.

Table Comparing Tax-saving Products Available Under Section 80C on Different Investment Aspects

Investment AspectsELSSTax-saver Fixed DepositNSCPPF
Lock-in period3 Years5 Years5-10 Years15 Years
Tax Deduction LimitUp to ₹1.5 lakh in a financial yearUp to ₹1.5 lakh in a financial yearUp to ₹1.5 lakh in a financial yearUp to ₹1.5 lakh in a financial year
Interest Rate/Returns Applicable12%-15% (Average)5.50%-7.55% per annum8% per annum8% per annum
Minimum Investment Amount Permitted ₹500₹1,000₹100₹500
Maximum Investment Amount PermittedNo LimitUp to ₹1.5 lakh a year (However, only one lump sum deposit is allowed)Up to ₹1.5 lakh a yearUp to ₹1.5 lakh a year
Premature Withdrawal FacilityNot availableNot availableAvailable during events such as the death of the investor or by the court orderPartial withdrawal allowed from the 7th financial year onward
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The table above clearly indicates ELSS to be a better option over other tax-saving schemes in terms of lock-in period and return prospects even though the latter point is increasingly dictated by the stock market sentiments during the period of investment. Also, there’s no investment cap on ELSS as opposed to its competing products where you can’t invest beyond a specific amount in a year. No investment cap raises the possibility of raking in massive surplus because of the high-return proposition of equities. ELSS investments can lead to an average return of around 12%-15% over a long period. With such return prospects, you can easily ward off the challenges posed by inflation in the future.

So, if you can invest in the volatility of equities, ELSS with a higher return proposition should be a better pick than its counterparts. Else, you can choose from the fixed income instruments of bank FDs, NSC or PPF on factors such as investment flexibility, returns, etc. However, you may have to put more money into these instruments to generate a surplus that can help deal with the high inflation scenario in the future.

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