Retirement planning is a crucial step towards ensuring financial security in your later years. Among the various investment options available, ELSS and PPF stand out for their tax-saving benefits and potential for wealth creation. But how do you choose between ELSS and PPF? Understanding the features, benefits and risks of these two options will help you make an informed decision that aligns with your long-term financial goals.
What is ELSS?
Equity Linked Savings Scheme (ELSS) is a type of Mutual Fund that primarily invests in equity markets. ELSS is designed to provide dual benefits — potentially high returns through market-linked investments and tax savings under Section 80C of the Income Tax Act.
Meaning of PPF
Public Provident Fund (PPF) is a government-backed savings scheme that offers a fixed return on investment. Known for its safety and stability, PPF is one of the most popular long-term investment options in India. The interest rate on PPF is set by the government and is revised quarterly.
Difference between ELSS and PPF
| Criteria |
ELSS |
PPF |
| Risks and returns |
Market-linked returns; potential for higher gains but not guaranteed |
Government-backed; fixed returns set by the government (currently 7.1% p.a.) |
| Lock-in period |
3 years |
15 years |
| Partial withdrawal |
Not allowed during the lock-in period; can redeem units after 3 years |
Allowed after 7 years, with certain conditions |
| Tax benefits |
Tax deduction up to ₹1.5 lakh under Section 80C; returns above ₹1.25 lakh are subject to 12.5% LTCG tax |
Tax deduction up to ₹1.5 lakh under Section 80C; interest and maturity proceeds are tax-free |
| Tenure |
No fixed tenure; can remain invested as long as desired after the lock-in period |
15 years, with an option to extend in 5-year blocks |
| Minimum deposit |
No specific minimum; SIPs can start from ₹500 per month |
₹500 per year, with a maximum limit of ₹1.5 lakh p.a. |
| Offered by |
Mutual Fund houses and investment platforms |
Government-approved banks and post offices |
How to invest in ELSS and PPF?
You can invest in ELSS through various channels like online investment platforms and Mutual Fund houses or through your financial advisor. One of the easiest ways to invest is through a Systematic Investment Plan (SIP), where you can invest a fixed amount regularly to spread your investment over time and reduce market risk. Axis Bank offers an array of ELSS Funds that you can invest in with ease through their digital platform.
Investing in PPF is simple too. You can open a PPF Account at any designated bank or post office. Axis Bank offers a hassle-free process for opening and managing your PPF Account online. You can deposit funds through online banking, and the interest is compounded annually, providing steady growth over the tenure.
PPF vs ELSS - Which is better?
- Choose ELSS if you are willing to take on higher risk for potentially higher returns and prefer a shorter lock-in period. ELSS is ideal for young investors or those with a higher risk tolerance looking to build wealth over the long term.
- Choose PPF if you prefer a safe, government-backed investment with guaranteed returns and have a long-term financial goal, such as retirement planning. PPF is ideal for conservative investors who value stability and tax-free returns.
Also Read: What are the Public Provident Fund (PPF) withdrawal rules?
Conclusion
Both ELSS and PPF cater to distinct investment needs — ELSS for those seeking higher returns with some risk and PPF for guaranteed stability. Whichever option you choose, Axis Bank offers a range of services to support your retirement planning and overall financial management, ensuring a secure and well-rounded approach to your future.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
Mutual Fund investments are subject to market risk, read all scheme related documents carefully. Axis Bank Ltd is acting as an AMFI registered MF Distributor (ARN code: ARN-0019). Purchase of Mutual Funds by Axis Bank’s customer is purely voluntary and not linked to availment of any other facility from the Bank. T&C apply.
