There is a growing craze among investors regarding Public Provident Fund (PPF) and ELSS. Both the schemes offer good returns and also get tax exemption under section 80C. Choosing any one of these two for investment is quite a dilemma.
New Delhi. A good investment scheme is one in which the investment made is safe and returns are excellent. Also, if tax benefits are available, then what to say? There is a growing craze among investors regarding Public Provident Fund (PPF) and ELSS. Both the schemes offer good returns and also get tax exemption under section 80C.
This is the reason why a common man has a lot of confusion in choosing one of these two for investment. This happens because at first glance both these schemes seem to be the same. But, both these schemes have their own characteristics and some drawbacks as well. Therefore, before investing in any of these, you should compare them.
Risk: Public Provident Fund is a scheme backed by the government. Therefore the investment made in it is 100% safe. There is absolutely no risk of losing money in this. Therefore, it is a great investment option for such investors who do not want to take any risk at all. Whereas ELSS is an equity linked investment scheme. There is market risk on investing in this. Therefore, if we look at the risk, then PPF is more correct.
Return: The rate of interest on PPF is decided by the government. The rate of interest is fixed every quarter. At present, interest is being paid on PPF at the rate of 7.1% per annum. In this way, there is a definite return on PPF.
Whereas, ELSS invests most of the money raised from investors in equity and equity-related securities. Hence the performance of ELSS is market linked. Hence the return is not fixed in it. However, ELSS usually gives returns of 12-14 per cent. ELSS is better in terms of returns, but the risk is high in it.
Investment Limit: One can invest up to Rs 1.5 lakh in PPF in a lump sum or in maximum 12 installments in a financial year. At the same time, 500 rupees can be deposited in it in a minimum year. Any amount can be invested in ELSS. Thus, there is no investment limit in this.
Tax Benefits: There are three types of tax benefits available on investment in PPF. If you get the benefit of tax deduction on the money invested in this, then there is no tax on interest and maturity amount. LTCG (Long Term Capital Gains) tax is to be paid at the rate of 10 per cent if the return on investment in ELSS exceeds Rs 1 lakh. In PPF and ELSS, tax benefits of up to Rs 1.5 lakh can be taken in a year.
