Things don’t come on a platter unless you are born with a golden spoon.
Everyone is aware that saving money should be the top priority and many of us look for smart and quick money saving options. But did we ever give a thought that there is a huge difference between saving money and investing?
Let’s look at how to invest your hard-earned savings that would define your financial strength. In this article, we will go through the key differences between ELSS, PPF and FD that would help you take a decision in where to invest as per your financial goals and risk-taking capability.
Equity Linked Saving Scheme (ELSS) is a variety of mutual funds which are invested primarily in equities. As an equity fund, the returns are reflected in equity markets and reported as capital gains on your ITR 2.
[ Read: Equity Linked Savings Scheme Guide ]
Public Provident Fund (PPF) is another common investment among Indians for generations/ages as it’s from the Central Government. Public Provident Fund is one of those investments that would suit any kind of investor which is completely safe and not market dependant like other investment options.
Fixed Deposits are one of the most common and preferred method of investments. This is the most favourite investment made by our father, grandfather and is followed even till date. They are completely free of risk and are meant for those people who are not ready to take any risk.
Here are various features of the most common Investments made by investors that are eligible for exemption u/s 80C of Income Tax of India Act, 1961.
|Eligibility to Invest||Any Individual Taxpayer including NRI’s||Resident Indian individuals||Any Individual Taxpayer including NRI’s and HUF|
|Investment Amount||500 to No Limit||500 to 1,50,000||100 to 1,50,000|
|Tax on Returns||Tax Free||Tax Free||Taxable|
|Expected Returns||10-15% (market linked)|
|Risk||Risk Involved||Risk Free||Risk Free|
|Loan Facility||Partial loan after 3-year lock-in period||Loan option available after 3 years||No loan option available|
|Tax Benefit||Rs. 1.5 lakhs u/s 80C||Rs. 1.5 lakhs u/s 80C||Rs. 1.5 lakhs u/s 80C|
|Investment Option||Medium – Long term Investment||Long term Investment||Medium – Long term Investment|
So, having understood the meaning, features and differences of the most common investment options ELSS PPF and FD, it’s time to check where to invest and get good returns.
Hence, it’s very important that along with savings, one needs to invest them in a right manner. It again depends on future needs, age and risk-taking abilities of the individual.
Those who have a high tolerance to risks can opt for ELSS while PPF can be opted by those who can tolerate low risk. For example, it’s like a young person who is 25 years of age can invest in ELSS while another individual who is nearing retirement or is at an age of 50 can opt for PPF or FD related investment.
ELSS is of popular among retail investors for long term saving along with investment. In case invested at the right time, ELSS can do wonders and reap good returns along with the following benefits:
Here is the table that would give you a fair idea on how investment in ELSS would give returns in the long run as per market conditions.
Note: These details are just for information purpose and is not to be considered as investment advisory.
|Fund||6 months (%)||1 year (%)||3 year (%)||5 year (%)|
|IDFC Tax Advantage (ELSS) Fund Growth||6.5||23.1||11.7||22.3|
|Tata India Tax Savings Fund Growth||1.5||14.6||12.3|
|L&T Tax Advantage Fund Growth||2.8||16.2||13||20.3|
|Aditya Birla Sun Life Tax Relief ’96 Growth||6.9||19.3||12.1||23.5|
|Aditya Birla Sun Life Tax Plan Growth||6.6||18.9||11.6||22.6|
|DSP BlackRock Tax Saver Fund Growth||0.277||9||11.4||21|
|Axis Long Term Equity Fund Growth||5.4||18.1||9.3||24|
So after considering the three products that are completely different, there is no right or wrong product. We have compared eligibility criterion, who can invest, lock-in period, tax status etc along with the risk factors.
ELSS can be considered over and above the tax benefits looking at its features as long-term investment which has the potential to provide the best in category returns.
At the same time, PPF is the safest long-term investment. As we have seen the investment options to be considered u/s 80C of Income Tax Act, 1961, one can make a wise choice as per their future needs, financial situation and investment horizon.