I am planning to start ELSS with Rs 3,000 monthly SIP for 10 years. I am confused between PPF and ELSS as tax savings investments. Which one should I choose for the long term?
Given your investment time frame, it would be a good idea to consider ELSS over PPF
I am planning to start ELSS with Rs 3,000 monthly SIP for 10 years. I am confused between PPF and ELSS as tax savings investments. Which one should I choose for the long term?
Chandan Kumar, Lucknow
To address your confusion – ELSS is a category of equity mutual funds in which investments have a lock-in of 3 years and after the lock-in period is over, it automatically converts into a normal open ended equity fund. As this is an equity fund, there is an obvious element of risk in these funds. It has the shortest lock-in period among all the tax saving options under Section 80C. On the other hand, PPF is probably the safest long-term investment option as it is backed by a sovereign guarantee. The tenure of PPF is 15 years with an option to rollover in tranches of 5 years as long as the investor desires. Of late as rates on these small savings schemes are heading downwards, the existing interest rate on PPF has also come down to 7.8 per cent. Given your investment time frame, it would be a good idea to consider ELSS over PPF, as it will not only help you save taxes, the long period will help you benefit from compounding, which will be in your interest for wealth creation.