ELSS VS PPF - Comparison, Tenure, Risks, Returns, Tax Benefits

Gaurav Seth
20 Likes | 1068 days ago



isVerifiedExpertAuthor is a Zfunds Verified Expert
Gaurav Seth


There are many investment products available in the market such as equity, debt, money market instruments, mutual funds, ELSS, PPF etc. Every investment product or scheme has its own features combined with different risk/return characteristics. Investments with high returns also carry high risks.

In today’s article we will talk about what are considered 2 of the best and most popular tax saving options available to investors i.e ELSS & PPF. In both of them, an individual can claim deductions under section 80C of the Indian Income Tax Act.

Section 80C: Section 80C as per the Income Tax Act, 1961 allows tax deductions up to an amount of Rs.1.5 lacs in a financial year. These deductions are allowed by the government to encourage individuals and households to park their savings in investments that will help them to meet their financial goals.

Also Read: Best Tax Saving Options under Sector 80C


ELSS also known as Tax Saving Funds are the only mutual fund schemes which provide the benefit of tax deduction under section 80c. ELSS funds invest primarily in equity and equity related securities. Due to their high exposure in equities, the risks involved in ELSS are also high. ELSS schemes are provided by several asset management companies and are managed by professional fund managers.

Also Read: Best ELSS Mutual Funds to Invest


PPF is a popular long term investment instrument provided by the Government of India. It comes with guarantee from the central government on the interest & corpus. They have been considered as the safest financial product with decent returns. PPF invests mostly in fixed income securities which have a low risk component.

You can take the help of the below listed points to understand the difference between PPF & ELSS and accordingly make a decision on where to invest.

Understand the Difference Between ELSS and PPF


PPF is completely backed by the Government of India, and the investments are made in fixed income securities. So the risk involved in PPF is almost negligible. Also, the interest rate is decided every quarter and there is no daily volatility.

ELSS is provided by the AMCs, they do not guarantee the returns as their investments are in equity securities. They are risky compared to PPF and are suitable for long term investments.


The return on PPF is announced by the central government every quarter. Currently (first quarter of 2020-21) the interest rate is 7.10%.

The best performing ELSS mutual funds can provide 12-15% returns annually over a period of 5 years or more.


In PPF, there is a lock-in period of 15 years and after which a 5 year extension can be made by the investor.

ELSS carries a lock-in period of 3 years and an investor can stay invested in the fund as long as he wishes to.


An investor can only withdraw partially i.e 50% of the amount subject to certain conditions like health emergencies, child education etc. after the completion of 5 financial years in PPF. 

However, in the case of ELSS one cannot withdraw any amount before the lock-in period of 3 years.

So an investor should analyse this before entering into investment as how prepared he is to meet emergency requirements.


PPF comes under the category of EEE(EXEMPT-EXEMPT-EXEMPT) as the amount at the time of investment, the interest earned, as well as the amount at the time of withdrawal all are completely exempted from tax.

On the other hand in ELSS, an investor can claim tax deductions to an extent of Rs.1.5 Lacs under section 80C. However, Long Term Capital Gains of value more than 1 lacs in a year are taxed at the rate of 10%.


In both PPF & ELSS, one can make investments either through a lump-sum or monthly installments.

In PPF, one can start with an amount of minimum Rs. 500 and is allowed a maximum to invest 1.5 lacs annually.

ELSS have no limit on maximum investment in a financial year, but have a minimum amount of Rs.500 to enter into a fund. An investor can invest as much as he wants but can claim deductions up to 1.5 Lacs as per section 80C.

Comparison of ELSS and PPF

MeaningELSS or Equity-linked Saving Scheme is a type of mutual fund which invests primarily in equity and equity-related securities. In addition, these funds also offer tax benefits under Section 80C.PPF or Public Provident Fund is a long-tenure investment product backed by the Government of India. The scheme offers a fixed rate of interest to investors.
RiskModerate to high riskLow risk
ReturnReturns are market-linked, can expect around 12% p.a. on long term investmentsThe current interest rate is 7.10% but is subject to revisions every quarter by the GOI
Lock-in period3 Years15 years
TenureNo fixed tenure, investors can stay invested for as long as they want15 years and can be extended for additional 5 years
Limit for investmentsThere is no upper limit for investments in ELSS and the minimum investment varies across fund house or AMCsMinimum- Rs. 500 Maximum- Rs.1,50,000
Premature WithdrawalsWithdrawals are not allowed during the lock-in periodCan withdraw up to 50% of the corpus after the completion of 5 years
Tax BenefitsOffers tax deductions of up to Rs.1.5 lakh per financial year under Section 80CTax deductions of up to Rs.1.5 lakh per financial year under Section 80C
Tax on interest earnedGains are taxed at the LTCG rate of 10% on the gains exceeding Rs.1 lakh in a financial yearInterest earned is exempt from taxes

Is ELSS better than PPF?

Both ELSS & PPF are excellent tax saving instruments. They have very different features in terms of risk, return, investment limits & others. An investor should make the decision on investing in them very wisely and as per his risk appetite & tolerance. One who is risk-averse and just wants stable returns can go for PPF for his tax-saving investment otherwise he can go for ELSS which provides a high return over a period of time. A careful attention needs to be given to the withdrawal part where one can withdraw early from ELSS as compared to PPF.

So which is the better option completely depends upon the investor’s risk profile & his financial goals.

Top Performing ELSS funds

Fund Name1-year Return3-year Return5-year Return
DSP Tax Saver Fund21.19%10.26%15.98%
ABSL Tax Relief 96 Fund16.09%6.88%12.21%
ICICI Pru Long Term Equity Fund19.90%9.84%12.86%
Mirae Asset Tax Saver Fund28.33%13.61%21.03%
Canara Robeco Equity Tax Saver Fund33.21%16.07%17.18%

*Returns are as of 02nd February 2021

Frequently Asked Questions (FAQs)

  • Which is best, ELSS or PPF?

Both the instruments are best in their respective features. However, ELSS funds are more preferable as they offer more liquidity to investors and carry the capability to generate higher returns than investments in PPF.

  • What is the lock-in period for ELSS?

ELSS has a lock-in period of 3 years and after that investors can stay invested as per their goals.

  • What is the lock-in period for PPF?

PPF has a lock-in period of 15 years which can also be extended for additional 5 years and after that investor will get the total corpus collected in the account.

  • Does the interest earned from the PPF account is taxable?

Interest earned from the PPF account is exempted from tax under the Income Tax Act.

  • What is the maximum limit of investment for PPF?

The maximum limit for investment in the PPF account is Rs.1.5 lakh in a financial year.

  • What are the returns offered by the ELSS?

ELSS does not have a fixed rate of return. ELSS returns are subject to market conditions. These funds have the potential to offer annual returns up to 12% p.a. on long-term investments.

  • What is the interest rate offered by the PPF?

PPF offers a fixed rate of interest which is subject to revisions every quarter by the Government of India. Currently, it is fixed at 7.10% p.a.

  • Are partial withdrawals allowed in the ELSS?

After the completion of the lock-in period of 3 years, investors can make withdrawals from their ELSS investments at any time as per their requirements.

More Information:

Understand the difference between ELSS and ULIP

NPS Vs PPF: Comparison, Tenure, Risks, Returns, Tax Benefits & Which is Better

What is Expense Ratio in Mutual Funds

Best Large Cap Mutual Funds to Invest in India

Best Small Cap Mutual Funds to Invest in India

Best Multi Cap Mutual Funds to Invest in India

Bharat Bond ETF - Meaning, Benefits, Price, Interest Rate, Review

Shariah Compliant Mutual Funds - Types, Who can Invest, Minimum Investment

Deduction under Section 80TTA

Get Investment Advice from India's Top Experts