Both ELSS and PPF are great investments for section 80C deduction of income tax act. However, there are some basic differences one should be understood before taking an investing decision.
| Factors | ELSS | PPF |
| Investment | ELSS is an equity mutual funds which invests primarily in shares or shares related investments | PPF is an investment vehicle which is like fixed deposit for long term period (15 years). One can invest monthly, quarterly or lump sum etc. |
| Returns | The returns in ELSS is not fixed and is completely dependent on equitymarket’s performance. | The returns obtained are fixed. The present rate of interest is 8.7% compounded annually. However, the rate of interest can change any time as per government policies. |
| Risk | There is no guarantee of principle safety in ELSS. However, equityinvestments generally give positive returns in long-term. As per our research, BSE SENSEX has delivered an annual return of 12.78% in past 10 years. | It’s government sponsored scheme and it’s completely safe. |
| Liquidity | Amount Invested in ELSS can be withdrawn any time after 3 years. | PPF have very low liquidity. One can withdraw certain amount after 7th year from PPF account, but overall it’s a scheme for long term investment only. |
| Tenure | The tenure ranges from three years till any time period as per the choice of investor | The minimum tenure is 15 years which can be increased further in a block of 3 years. |
| Lock in period | There is lock-in period of 3 years. | The lock-in period in PPF is 15 years. One can’t close PPF before the completion of full 15 years. |
| Onlinetransaction | ELSS can be done Online. An investor can invest or sell ELSS fund any time | For PPF, some banks have started giving online facility. However, first-time investor has to visit the bank and do the initial registration by submitting documents. |
Further, we advise you to consult your advisor or check your risk profile before making any investing decision.
