When it comes to saving tax under Section 80C, two popular choices are ELSS (Equity-Linked Savings Scheme) and PPF (Public Provident Fund). Both help you reduce your taxable income, but they work very differently. Let’s break them down so you can choose the right option for 2025.
1. What is ELSS?
ELSS is a type of mutual fund that invests primarily in equities (stocks).
- Lock-in Period: 3 years (lowest among 80C options)
- Returns: Market-linked (historically 10–14% CAGR)
- Risk: Moderate to High (since it is equity-based)
- Liquidity: Can redeem after 3 years, no limit on how much you can withdraw
2. What is PPF?
PPF is a government-backed savings scheme offering guaranteed returns.
- Lock-in Period: 15 years (partial withdrawal allowed after 6 years)
- Returns: Fixed by government (currently around 7–8%)
- Risk: Virtually zero (sovereign guarantee)
- Liquidity: Low, funds are locked for long-term
3. Key Comparison:
- Returns: ELSS can give higher returns but is market-dependent. PPF gives fixed, safe returns.
- Risk: ELSS carries market risk, PPF is risk-free.
- Lock-in Period: ELSS – 3 years, PPF – 15 years.
- Taxation:
- ELSS – Gains taxed as LTCG (10% after ₹1 lakh exemption)
- PPF – Fully tax-free (EEE – Exempt-Exempt-Exempt)
- Best for:
- ELSS – Young investors, those seeking higher growth
- PPF – Conservative investors, those seeking stability
4. Which is Better in 2025?
- If your goal is wealth creation + tax saving, ELSS wins because it offers higher return potential in the long run despite some volatility.
- If your goal is capital protection + guaranteed returns, PPF is better as it is completely safe and gives assured income.
Pro Tip: You don’t have to choose just one — you can invest in both. This way, you enjoy growth from ELSS and stability from PPF.
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