An ideal investment is not just limited to high returns, but also taxability. If you earn high returns but end up losing all or most of it to taxes, you will find yourself right back where you started. Hence, understanding the tax benefits and liabilities along with the features of different investment options is crucial and can help you make an informed decision.
| Point of difference | Equity Linked Saving Scheme (ELSS) | Fixed Deposit (FD) | Public Provident Fund (PPF) | National Savings Certificate (NSC) | National Pension System (NPS) | Mutual funds |
| Meaning and purpose | ELSS is a type of mutual funds online that primarily invests in equity. | An FD is similar to a savings account but offers a higher rate of interest. It is offered by banks and NBFCs. | PPF is a low risk, long-term savings option offered by the Government of India. | NSC is a tax-saving scheme that can be opened at a post office. | NPS is a tax-saving instrument designed specifically for retirement savings. | Mutual funds are a type of investment tool that pools money from different investors and invests it further in bonds, stocks, etc. |
| Lock-in period | 3 years | 5 years | 15 years | 5 years | Until retirement | There is no lock-in period. |
| Minimum investments | Rs. 500 | Depends on the bank or NBFC | Rs. 500 | Rs. 100 | Rs. 6000 p.a | You can invest with as little as Rs. 100 per month through a SIP. |
| Returns | 15-18% | Depends on the bank or NBFC but can range from 6.5 to 7.5% | 7-8% | 7-8% | 12-14% | The returns for debt and equity funds can range from 5-6 % and 11-13% respectively. |
| Tax exemption | Rs. 1.5 lakhs p.a under Section 80C | Rs. 1.5 lakhs p.a under Section 80C | Rs. 1.5 lakhs p.a under Section 80C | Rs. 1.5 lakhs p.a under Section 80C | Up to Rs. 2 lakhs p.a under Section 80C | Long-term capital gains of up to Rs. 1 lakh a year are tax-exempt. |
| Tax charged on interest | 10% long term capital gains tax on earnings over Rs. 1 lakh | Taxed as per the income tax slab | No tax charged | Taxed as per the income tax slab | Partially taxed as 60% of the income is tax-free | They are taxed as per short-term and long-term capital taxes. |
| Risk index | Market-related risks | Low risk | Low risk | Low risk | Market-related risks | The risk can depend on the type of mutual funds you choose. Equity involves more risk, whereas debt is low risk. |
Here are some different tax-saving schemes that can help you fulfill your future goals and, at the same time, offer good returns.
To sum it up
Including tax-saving schemes in your investment portfolio can help you save more money and ultimately increase your profits. In addition to this, diversifying your portfolio with low-risk options like FDs as well as moderate to high-risk options like mutual funds online and ELSS can ensure growth and stability in the long run. Multiple investment apps like the moneyfy app in the market let users invest in various funds like ELSS.
