Saturday, November 27, 2021

ELSS a better Tax Saving Instrument as compared to PPF

Traditionally we all have been investing in PPF (Public Provident Fund) mainly because
1) It can be shown as part of Sec 80C to reduce our Taxable Income
2) The returns are tax free
3) Guaranteed Return
4) High Rate of Returns
Although the above first 3 points still hold true, for the 4th point it is historically seen that the Rate of Return has seen a downward trend.
In the year 2000 the Return% was 11% and with every passing year the returns have reduced and now in 2021 it has come down to 7.1%.
Honestly PPF is no longer a lucrative investment option instead one should invest in ELSS (Equity linked Saving Schemes - Mutual Fund)
 1) It can be shown as part of Sec 80C
 2) Lock in is 3 years as opposed to 15 years in PPF
 3) If one had invested 1.5 lakhs in PPF and 1.5 lakhs into ELSS every year since April 2007, the returns would have been as follows
 PPF - 42.46 Lakhs
 ELSS - Average - 77.45 Lakhs
        Maximum - 94.53 Lakhs
        Minimum - 67.63 Lakhs

 The choice is obvious if the purpose is Tax Saving as well as Superior Returns.
Happy Investing !!



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