Tax Saving-PPF or ELSS

When we think of tax saving investments, the first thing that comes to our mind is PPF (Public Provident Fund). It is considered to be safe, giving regular return with government backing.

ELSS (Equity Linked Saving Scheme) is a new avenue for the investors looking to save tax Section 80C. Inspite of long-term capital gain these ELSS schemes give much better returns than PPF.

Let’s see the comparisons of these two Tax-Saving instruments.

Dates Investment Amount Interest Rate in PPF  Fund Value of PPF Account NAV of ELSS Fund Value of ELSS scheme
31-Mar-08 150,000.00 1,50,000 9.75 1,50,000
31-Mar-09 150,000.00 8.00% 2,58,000 5.2 2,30,000
31-Mar-10 150,000.00 8.00% 4,28,640 10.91 6,32,557
31-Mar-11 150,000.00 8.00% 6,12,931 11.18 8,68,962
30-Mar-12 150,000.00 8.60% 8,15,643 10.07 10,99,213
28-Mar-13 150,000.00 8.80% 10,37,419 11 15,19,020
31-Mar-14 150,000.00 8.70% 12,77,675 13.7 25,59,366
31-Mar-15 150,000.00 8.70% 15,38,833 21.73 26,18,675
31-Mar-16 150,000.00 8.70% 18,22,711 20.96 33,75,868
31-Mar-17 150,000.00 8.10% 21,20,351 25.82 41,37,761
31-Mar-18 150,000.00 7.60% 24,31,498 30.5 43,79,243

These are the real returns given by the PPF in last 11 years.

  • These are the returns generated by an ELSS scheme of Mutual Fund by AMFI Site.

To summarize, Rs. 1.5lacs invested annually in an ELSS scheme generated approx. Rs.43.79 Lacs in last 11 years, whereas the same amount invested in a PPF scheme would have created a corpus of apprx. RS.24.31 lacs.

If you had invested in ELSS, you would have got approximately 19.5 lacs extra.

It is just a matter of right guidance.

PPF ELSS
Lock-in period 15 years 3 years
Account opening Fee Varies from Bank to bank No account opening fee
Minimum Investment Rs.500/- per year No minimum deposit criteria
Maximum Deposit in a year Rs.1,50,000/- No maximum deposit criteria
Number of deposit in a year 12 No limit
Tax No tax on the interest earned Return above Rs.1 lac is taxed @10%
Withdrawal Withdrawal is allowed after the 7th year of opening the account Withdrawal is after 3 years
Loan Facility After 3 years of opening the account No such facility
Where to open the account Banks and Post-office Individuals or companies that sell Mutual funds
Rate of interest *7.6% compounding annually No fixed Interest Rate. Returns are related to stock market performance.

Post-Tax returns of both the schemes-

PPF ELSS
Amount Invested RS.16,50,000/- RS.16,50,000/-
No. of years 11 11
Return Generated Rs.24,31,498/- Rs.43,79,243/-
Return before TAX Rs.7,81,498/- Rs.27,29,243/-
Taxable amount Nil 27,29,243-1,00,000=26,29243
Tax Rate Nil 10%
Tax to be Paid Nil 26,29,432*10/100=2,62,924
Return after tax Rs.7,81,498/- Rs.24,66,318/-
Post Tax Return 47% 149%
Annual Rate of Return 8% 18%

One Simple decision can help you get almost 20 Lacs more, without any special effort from your end. It’s like the effort which goes in farming is same…if the soil is more fertile, you get more yield from the same resources.

We all move to new technologies with times like smart phones, newer and more efficient air conditioners, then why not switch tax- saving schemes?

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