PPF or ELSS: What’s Better Long-term?

By | March 30, 2016

PPF or ELSS: What’s Better Long-term?

Design Credits: Rakesh Mohan

When it comes to long-term investments with good returns and tax-saving benefits, Equity-Linked Savings Schemes (ELSS) and Public Provident Fund (PPF) are probably the two most popular investment options.

Let’s learn a little more about PPF and ELSS. It will help you make an informed decision when investing.

Factors PPF Account ELSS Schemes
Investment pattern PPF invests in government bonds and these are backed by the Central Government of India. ELSS invests your money in the share market. It is an equity Mutual Fund investment.
Risk factor PPF is a government sponsored scheme and hence it’s considered to be a safe investment. The risk level is comparatively higher in ELSS and there is no guarantee of principal safety in this scheme.
Returns The PPF investment returns are pretty fixed, as you get a fixed interest and principal amount on maturity. ELSS returns are completely dependent on share market performance and cannot be guaranteed.
Liquidity factor PPF typically has a lock-in period of 15 years. You can do a partial withdrawal after five years but overall it’s a long-term investment. ELSS schemes typically have a lock-in period of three years. You can choose to reinvest after that period.
Tenure PPF accounts have a minimum tenure of 15 years, after which you can increase it in a block of five years. The minimum tenure is for three years. Post that, the tenure completely depends on you.
Online transactions Only some banks have an online facility for PPF accounts. Also, first-time investors need to personally visit the branch to open the account and for document submission. ELSS investments can be done completely online. You can invest or sell ELSS funds any time through an online transaction.
Investment limit You cannot invest more than Rs. 1.5 lakhs in a year in a PPF account. There is no such restriction on the investment limit in an ELSS scheme.

An ELSS investment is good if:

  • You have a high-risk appetite.
  • You are able to invest a good amount of money for several years.
  • You have a good understanding of the share market.
  • You aren’t on the verge of retirement.

A PPF investment is good if:

  • You are averse to risk taking and prefer maximum security with regard to investments.
  • You can invest and wait for 15 years to get returns.
  • You can invest a certain amount regularly.
  • You are nearing retirement.

Additional Reading: What you should know about PPF

If you are still unsure about which option to invest in, why not balance your investments between the two?

All information including news articles and blogs published on this website are strictly for general information purpose only. BankBazaar does not provide any warranty about the authenticity and accuracy of such information. BankBazaar will not be held responsible for any loss and/or damage that arises or is incurred by use of such information. Rates and offers as may be applicable at the time of applying for a product may vary from that mentioned above. Please visit www.bankbazaar.com for the latest rates/offers.

2 thoughts on “PPF or ELSS: What’s Better Long-term?

  1. K Kannan

    Sir I think PPF renewal is for a term of 5 years after the initial 15 year term .You had mentioned it as 3 years .Just for updation of iinfo.Please correct me if am wrong.

    1. Team BankBazaar

      Hi K Kannan,

      Thanks for writing to us. Yes, you are right. For PPF, you can keep extending the deposit term by a period of 5 years at a time. For ELSS schemes, the minimum lock-in is for three years. Post that, the tenure completely depends on you.


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