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elss vs ppf

ELSS vs PPF : Difference between Equity Linked Saving Schemes and Public Provident Fund

As we know, with proper planning of investment, we can achieve our goals, tax benefits. We have many options for saving tax. Public Provident Fund (PPF) and Equity linked saving schemes (ELSS) fall under Income Tax section 80C tax saving options. Often, investor gets confused where to invest money for saving tax, PPF or ELSS? Let’s understand what is PPF and ELSS and then difference between ELSS and PPF.

What is ELSS?

ELSS is the only kind of mutual funds which fall under tax saving options. As the name suggests, Equity linked saving schemes (ELSS) invests in equity market. As the equity market is volatile, ELSS carries risk along with it. But it gives highest return as compared to any other tax saving option. ELSS is catching eye of modern generation due to its high return.

ELSS has dual benefits such as tax deduction and wealth accumulation. The lock in period of 3 years is the shortest among all tax saving investment options. This option is the best for investor who can tolerate risk.

What is PPF?

Public Provident Fund is traditional type of investment. PPF is ideal investment for those who have low risk appetite. As it is government-backed saving scheme, the returns are guaranteed. It’s a long-term investment. Interest rates are fixed by government every quarter.

PPF has lock in period of 15 years. PPF provides interest 7% to 8%. Investor needs to open PPF account through banks and the post office. A pan card holder can open only one PPF account under his/her name. Investor can invest minimum Rs 500 and maximum Rs 1,50,000 in PPF.

Comparison of ELSS and PPF | ELSS vs PPF

 Public Provident Fund (PPF)Equity Linked Saving Scheme (ELSS)
Tax Benefitamount invested, interest earnings and the final corpus on maturity are all exempt from taxlong-term capital gains tax at 10% when returns are Rs.1 Lakh or higher
Lock in Period15 years3 years
Risk TypeModerateHigh
Investment AmountMinimum Rs 500 Maximum Rs 1,50,000Minimum Rs 500 Maximum no limit but tax on 150,000 in a financial year is deductible.
Who can InvestAnyone except HUFsEveryone
Time Horizon15 years + Additional 5 yearsContinue as long as investor wishes
Mode of investmentlumpsum or maximum 12 installments in a financial yearLumpsum or Systematic Investment Plan (SIP)
Managed byCentral Government of IndiaParticular Fund Manager of Mutual Fund House
ReturnModerate-fixed by governmentHigh as it invests in equity market
Process to InvestInvestor needs to open PPF account through banks and the post officeInvestor can invest directly through the AMC website, online investment portals or through De-mat agents and registrars
LiquidityInvestor can withdraw partial money after the completion of 5 years, investor can take a loan on the PPF deposits from 3rd to 6th financial year from the year of account openingInvestor can withdraw after lock in period of 3 years


We read what is ELSS and PPF and difference between both. Both PPF and ELSS are tax saving investment options and both should be planned at the beginning of financial year for more benefits.

Again, to choose between PPF and ELSS depends upon risk capacity, return expectations, time horizon. So, PPF is suitable for investor who doesn’t want to take much risk and who can wait till 15 years lock in period.

But if investor can take risk and wants higher returns then he should choose ELSS.

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Is ELSS safe?

ELSS is equity fund that invests in equity fund. So, it carries risk. But it gives higher return along with tax benefit.

Is ELSS taxable after 3 years?

Long-Term Capital Gains on ELSS are tax-exempt up to Rs 1 lakh and dividend received is tax free.

Can I invest more than 1.5 lakhs in ELSS?

You can invest as much as you want but investment exceeding 1.5 lakh is  not eligible for tax deduction.

What if I invest more than 1.5 lakhs in PPF?

A person can have only one PPF account and can invest upto Rs 1.5 lakhs per year.

Can a person have 2 PPF accounts?

A PAN card holder cannot open more than one account in his/her name.

Can husband and wife have separate PPF accounts?

Yes, if both of husband and wife have their own sources of income.

Can I increase PPF amount?

You can invest upto Rs 1.5 lakhs. Limit is minimum Rs 500 and maximum Rs 1,50,000.

Can kids open PPF?

Yes, PPF account of minor can be handled by parent or guardian till minor turns 18. A PAN card holder cannot open more than one account in his name but can open on his minor child’s name. But total investment in PPF against single pan card cannot exceed Rs 1.5 lakhs.

Can I buy ELSS without demat account?

You don’t need demat account to invest in mutual fund. You can invest through AMFI registered mutual fund advisor or through fund house’s website.

Post Author: ashwini

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