Personal Finance Guide

PPF vs ELSS: Choosing the Right Path to a Secure Future

Tax-saving investments are a boon for future savings in India. Subsequently, Among the popular options, Public Provident Funds (PPF) and Equity Linked Savings Schemes (ELSS) sometimes put investors in a predicament. Both provide tax advantages, but they differ greatly in terms of returns, lock-in, risk, and flexibility. So, which one is best for you?

Public Provident Fund (PPF)

Nature of Investment:

  • PPF is a long-term investment option backed by the Government of India.
  • It is a fixed-income investment with a lock-in term of 15 years, giving a predictable and secure return.

Interest Rate:

  • The Governemnt of India declares the interest rate on PPF and is subject to change. However, once invested, the rate remains fixed for the whole tenure. As of 1st Jan 2024, the rate has been set at 7.1%. 

Tax Benefits:

  • PPF possesses EEE (Exempt-Exempt-Exempt) classification, meaning the investment amount, interest generated, and maturity funds are all tax-free.
  • Contributions to PPF are eligible for tax deductions under Section 80C of the Income Tax Act.


  • While PPF has a long lock-in period of 15 years, partial withdrawals are allowed from the 7th year onwards.
  • The account can also be extended in blocks of 5 years after maturity, offering flexibility.

Risk Profile:

  • PPF is considered a low-risk investment due to the sovereign guarantee offered by the government.
  • Returns are moderate but stable, making it suited for conservative investors.

Equity Linked Savings Scheme (ELSS)

Nature of Investment:

  • ELSS is a form of mutual fund that predominantly invests in equities and equity-related assets.
  • It comes with a lock-in duration of 3 years, which is much shorter than PPF.


  • ELSS provides the potential for better returns compared to PPF due to exposure to the equity markets. However, returns are market-linked and can be volatile, making it ideal for investors with a higher risk tolerance.(Average ELSS Returns(15-18%))

Tax Benefits:

  • ELSS investments are eligible for tax deductions under Section 80C, comparable to PPF. However, the gains from ELSS are liable to Long-Term Capital Gains (LTCG) tax if the redemption value exceeds Rs. 1 lakh.


  • ELSS offers a shorter lock-in period of 3 years, giving more rapid access to money compared to PPF.
  • Investors can redeem their units when the lock-in period expires.

Risk Profile:

  • ELSS is considered a higher-risk investment owing to market volatility.
  • It is intended for those with a longer investment horizon as well as a willingness to tolerate short-term market swings.


A long-term investment of Rs. 5000/month for 20 years can significantly build your wealth, with PPF offering a secure foundation of Rs. 26 Lakh at 7.1% Returns PA and ELSS potentially reaching a higher target of Rs. 75 Lakh at 15-18% returns PA, depending on market conditions.

Which one is right for you?

The answer depends on your specific circumstances and financial aspirations. Consider the following factors:

Risk tolerance

  • If you are risk-averse, PPF's returns are more suitable. Furthermore, If you can withstand short-term swings for potentially bigger long-term benefits, ELSS could be a smart alternative.

Investment horizon

  • PPF is appropriate for long-term goals like retirement, whereas ELSS demands a medium-to-long-term outlook.

Need for liquidity

  • If you may need to access your money before maturity, ELSS gives greater flexibility compared to PPF.



  • Salaried professionals seeking a secure and reputable investment solution.
  • If you are seeking for a low-risk investing choice.
  • If you want to diversify your portfolio while saving money on taxes.
  • ELSS mutual funds can be invested in by people of any age.


  • PPF accounts are exclusively available to Indian citizens.
  • An Indian citizen residing in another nation may continue to run his or her PPF account.
  • Parents/guardians can open a PPF account on behalf of their minor children.

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Disclaimer: The report only represents the personal opinions and views of the author. Also, No part of the report should be considered a recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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