PPF vs ELSS: Which One Is Better To Choose?

What Is ELSS Fund?

Things to Know About ELSS

What Is Public Provident Fund (PPF)?

Things to Know About PPF

PPF Vs ELSS

The following table shows the main differences between PPF vs. ELSS:

Points of Difference

PPF

ELSS

Risk

Risk is low as it is backed by the government.

These are subject to higher market risks since they invest in equities and equity-related assets.

Interest Rate

It is fixed by the government at 7.9%.

Interest rates depend on how the market performs.

Lock-in Period

15 years of the lock-in period. But partial withdrawal can be made after 5 years.

The lock-in period is of 3 years but can be extended.

Tax on Returns

The returns you gain are completely tax-free.

Gains beyond ₹1 Lakh are taxed at a 10% interest rate since they are considered long-term capital gains.

Volatility

Low volatility since it is backed by the government.

Volatility is higher as it is dependent on the market.

Which Is Better, PPF or ELSS?

FAQs about ELSS Vs PPF

What is EEE in PPF investments? up-arrow

EEE is a taxation related phrase that stands for Exempt-Exempt-Exempt, which is applicable to PPF. This means at the time of investment, build-up, as well as withdrawal, your invested amount is completely tax-exempt.

Which offers better protection against inflation between ELSS and PPF? up-arrow

Since PPF investments are secured by the government, they possess negligible market risks. However, they cannot offer protection against inflation. Your deposit receives no real returns if inflation exceeds the most recent guaranteed rate of interest.

What is the minimum amount you can invest in ELSS and PPF? up-arrow

The minimum amount of investment in ELSS is ₹500 and has no maximum limits. PPF also has a minimum requirement of ₹500 that you have to pay at regular intervals to keep your account active.