Saving taxes is something that everyone would like to do. There are many investment schemes like Equity-Linked Saving Scheme, National Pension Scheme, Tax saving FDs, NSC, and PPF, which offer tax benefits under Section 80C. In this article, we have compared ELSS with NPS.
Equity-Linked Savings Scheme (ELSS) | National Pension Scheme (NPS) | |
What is the lock-in period? | ELSS has a lock-in period of 3 years. | NPS has a lock-in period of up to retirement. |
What is the minimum annual investment? | You can invest Rs 500 either as a lump sum or as a SIP investment. | You can invest Rs 500 as an initial contribution in a year. |
What are the tax benefits? | You can claim a tax deduction of up to Rs 1.5 lakh p.a. under Section 80C of the Income Tax Act. | You can claim a tax deduction of up to Rs 1.5 Lakh p.a. under Section 80C and an additional Rs 50,000 under Section 80CCD (1B) of the Income Tax Act. |
Where is the money invested? | The entire amount is invested in equity in a diversified manner and is monitored regularly. | A maximum of 50% is invested in equity. The rest is distributed in government bonds, treasury, etc. |
What about premature withdrawals? | Funds invested in ELSS cannot be prematurely withdrawn. | You can withdraw prematurely within certain limits and under the condition of purchasing an annuity. |
Are the returns taxable? | LTCG over Rs 1 lakh is taxable at 10% | The maturity amount is partially taxable. |