NSC Vs ELSS - Which One Is Better For Tax Saving Investment? (2024)

FAQs

NSC Vs ELSS - Which One Is Better For Tax Saving Investment? ›

The choice between ELSS and NSC hinges on individual financial goals and risk appetite. “ELSS suits those seeking higher returns with higher risk tolerance, while NSC offers stability and guaranteed returns for risk-averse investors," said Abhishek Soni, CEO and Co-founder of Tax2win.

ELSS offers more control and flexibility in managing your investments, as you can choose between different fund options, aligning with your risk appetite and financial goals. While offering some flexibility, NPS has certain restrictions on withdrawals and annuity purchases, emphasising long-term retirement planning.

ELSS is covered under the Section 80C provisions and therefore, you can claim tax deductions of up to Rs 1,50,000 a year. This will help you save up to Rs 46,800 a year in taxes. These funds come with a mandatory lock-in period of three years, which is the shortest among all 80C options.

National Pension System (NPS) and Equity-Linked Savings Scheme (ELSS) are two of the most popular tax-saving investment options under Section 80C of the Income Tax Act, 1961. ELSS is the better of the two as it has the potential to provide higher returns and come with a lock-in period of just three years.

You want short-term gains

Chasing quick returns through ELSS funds might not always work, and hence, you should not invest in ELSS funds if you want returns quickly. ELSS funds may be suitable for you only if you have a longer investment horizon.

Since ELSS funds are locked up for three years, there is no way to realize short-term profit gains. As a result, you can only realize long-term capital gains. These gains are tax-free up to Rs 1 lakh per year, and any earnings beyond this amount are subject to a 10% long-term capital gains tax.

Why not to invest in ELSS? ›

If you are looking for guaranteed safe returns, get very anxious, and will get sleepless nights when markets are volatile and negative, or you don't have a long-term horizon, then ELSS is not a good option for you.

ELSS investments held for more than three years are considered Long-Term Capital Assets and any gains from redemption are subject to Long-Term Capital Gains Tax (LTCG) at a rate of 10% on gains exceeding Rs 1 lakh. Additionally, the gains are eligible for indexation benefits, reducing the tax liability.

If you are looking to make the most of your golden years, it can be a good idea to start on a retirement plan today. Given its duration to help fulfil a long-term investment goal, ELSS can be a suitable option. It provides you with tax benefits in the short-term and a high-yield potential in the long-term.

Yes it will be advisable to invest more than 2 elss fund for tax deduction and wealth creation but you will be get only tax deduction up to 1.5 lakh only . You can definitely invest in two or more elss funds. Since it's your money it's your choice whether to choose one fund or multiple funds.

ELSS funds are a good option for investors with a long-term investment horizon looking to seek exposure to the stock markets and save taxes. There are various ELSS funds available. Research your options and ensure that you choose a fund that syncs with your financial plan while helping you reduce your tax liability.

As risks are high, equity mutual fund offers more return in the long term. “NPS schemes generally offer 10-12% returns, whereas Equity Mutual funds offer 14-16% return in the long-term. So, one has to choose as per their risk appetite and investment objective," said Ravi Singhal, CEO, of GCL Broking.

NPS is a compelling option for retirement planning, offering exclusive tax benefits. On the other hand, Mutual Funds provide flexibility, a wider array of choices, and liquidity, making them versatile tools for various financial objectives.

A. NPS can fetch you 10-14% of returns but with market risks alongside. But since the scheme is under the regulation of the government, chances of malpractices are nominal. PPF on the other hand, provides completely safe investment and guaranteed returns as it is backed by the government and not linked to the market.

For all of these needs, a PPF scores over NPS as the best investment scheme. Try Now!