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The best option depends on your goals—choose PPF for safety, ELSS for growth, or NPS for retirement.
Each scheme has its unique strengths. (Unsplash/Freepik)
When it comes to building long-term wealth and securing your financial future, India offers a range of savings schemes suited for different needs and risk profiles. Among the most popular options are the Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS), and the National Pension System (NPS). These schemes not only help inculcate disciplined saving habits but also offer tax benefits under Section 80C of the Income Tax Act.
Choosing the right one depends on your financial goals, risk appetite, and time horizon. Let’s dive into how each of these schemes works and what benefits they bring to the table.
1. Public Provident Fund (PPF): PPF is a government-backed, fixed-income savings scheme that offers a secure way to grow your money. It has a tenure of 15 years and currently offers interest rates of around 7-8 per cent, compounded annually.
The interest earned and the principal invested are both tax-free, making it an EEE (Exempt-Exempt-Exempt) instrument. It suits conservative investors who prefer capital protection and steady returns over the long term.
2. Equity-Linked Savings Scheme (ELSS): An ELSS is a type of mutual fund that primarily invests in equities. It comes with a lock-in period of just 3 years, the shortest among all tax-saving options under Section 80C.
While returns are market-linked and can be volatile, they offer higher growth potential over time. ELSS is ideal for young investors or those with a higher risk tolerance seeking tax savings with potentially better long-term returns. Returns above Rs 1 lakh are taxed at 10 per cent under long-term capital gains (LTCG) tax.
3. National Pension System (NPS): NPS is a retirement-focused investment scheme regulated by the Pension Fund Regulatory and Development Authority (PFRDA). It offers exposure to a mix of equity, corporate bonds, and government securities.
Investors can claim tax deductions of up to Rs 2 lakh per annum in an NPS Tier 1 account. It’s best suited for individuals planning long-term retirement savings with moderate risk tolerance.
Which Is Best for You?
Choosing between PPF, ELSS, and NPS depends on your financial goals, investment horizon, and risk tolerance.
PPF is ideal for safe, long-term savings; ELSS suits those seeking high returns and tax benefits; and NPS is great for building a retirement corpus.
Rather than picking just one, a balanced mix of all three can help diversify your savings effectively.
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al…Read More
A team of writers and reporters decodes vast terms of personal finance and making money matters simpler for you. From latest initial public offerings (IPOs) in the market to best investment options, we cover al… Read More
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