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|
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.
|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-
|No. of years||11||11|
|Return before TAX||Rs.7,81,498/-||Rs.27,29,243/-|
|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?