Making an investment decision is never easy. With so many options available, finding the one that is perfect can be confusing. If you are looking to balance growth and tax benefits, then it can be even harder.
This is where you would need to complete ELSS and PPF. While both are long-term, offer great returns, and tax benefits, there are some differences. So, read this blog to know everything you need to make the right decision.
Equity Linked Savings Scheme (ELSS)
ELSS mutual funds provide tax-saving perks alongside a mandatory three-year lock-in duration. Its primary allocation goes toward equity plus similar asset types. The returns are usually high, with a potential reaching 12-14% PA.
To help you out, here are the best tax saving mutual funds:
| Fund Name | 3-Year Return (%) (5-5-2025) | 5-Year Return (%) (5-5-2025) |
| SBI Long-Term Equity Fund (Direct Plan) (G) | 25.24 | 29.08 |
| Motilal Oswal ELSS Direct Tax Saver (G) Plan | 24.22 | 26.87 |
| HDFC ELSS Tax saver – Direct Plan (G) | 23.54 | 27.98 |
You can claim up to ₹1.5 lakh per year as a tax rebate. Any profit more than ₹1.25 lakh a year is taxed at 12.50% as long-term capital gains. It is suitable for investors with a moderate to high risk appetite and those looking for a high rate of return.
Public Provident Fund (PPF)
The PPF scheme, supported by the central government, holds a lock-in term of 15 years. It offers guaranteed, fixed returns of around 7.10% PA. With this, you can get ₹1.5 lakh yearly in savings as this benefit falls under Section 80C.
PPF has EEE status, so the deposit, interest amount, and payout come without any tax. Under certain conditions, partial withdrawals are allowed after 5 years. PPF is for investors who are looking for a long-term but low-risk investment option and need assured returns with full tax benefits.
ELSS vs PPF: Key Differences
To find the answer to which option is better, you must know the difference between the two. So, here is a detailed comparison of ELSS and PPF.
| Parameter | ELSS | PPF |
| Type of Investment | This option mostly directs capital into equities or similar assets. | PPF is a government-backed fixed-income savings scheme. |
| Risk Level | ELSS carries a higher risk as returns depend on market performance. | The government backs it, and so it is risk-free. |
| Returns | ELSS offers potentially higher returns (historically 12-14%), but these are not guaranteed. | It offers returns set by the government. It is 7.10% PA at present, which is fixed and assured. |
| Lock-in Period | There is a 3-year lock-in period. Among all Section 80C choices, this has the least duration. | There is a 15-year lock-in. Post that you can increase in multiples of 5 years. |
| Tax Benefits | You may deposit any figure, yet ₹1.5 lakh each year is eligible as a deduction under Section 80C. | Annual deductions up to ₹1.5 lakh may be claimed through Section 80C. |
| Tax on Returns | Any profit more than ₹1.25 lakh PA is taxed at 12.50% as long-term capital gains, but below that is free. | This is totally tax-free in nature. |
| Minimum/Maximum Investment | Minimum investment is ₹500; no upper limit, but tax benefit is capped at ₹1.5 lakh per year. | Beginning with ₹500 yearly is permitted, and ₹1.5 lakh each annum marks the highest contribution. |
| Liquidity | Liquidity is available after 3 years only. | After 5 years, a partial amount can be taken out; full withdrawal is allowed after 15 years. |
| Ideal For | ELSS is suitable for investors seeking higher returns and willing to accept some risk. | PPF suits cautious investors who prefer stable growth with no tax burden. |
Conclusion
Evaluating risk and return plays a crucial role when selecting between ELSS and PPF. For those seeking returns tied to markets, ELSS offers a preferable route. But if you need secure returns, then PPF is better.
