If you want growth and the shortest lock-in, ELSS. If you want a guaranteed, fully tax-free return with sovereign safety, PPF. If you want an extra Rs.50,000 deduction on top of the 80C limit and you are saving specifically for retirement, NPS. Most people end up using a combination.
All three qualify for the Rs.1.5 lakh deduction under Section 80C of the old tax regime (NPS adds a separate Rs.50,000). But they behave very differently.
| ELSS | PPF | NPS | |
|---|---|---|---|
| Type | Equity mutual fund | Government savings scheme | Market-linked retirement account |
| Lock-in | 3 years | 15 years | Until age 60 |
| Return | Market-linked (~equity) | Fixed by govt, ~7% now | Market-linked, you pick the mix |
| Safety of capital | No guarantee | Sovereign guarantee | No guarantee |
| Tax on maturity | LTCG 12.5% above Rs.1.25 L/year | Fully tax-free | 60% tax-free lump sum, 40% must buy an annuity (taxed) |
| Extra deduction | No | No | Yes, Rs.50,000 under 80CCD(1B) |
Someone in the old regime, mid-career, might put Rs.50,000 into PPF for the guaranteed base, Rs.1,00,000 into ELSS for growth, and Rs.50,000 into NPS for the extra deduction. Your split depends on your age, how much certainty you want, and whether you are locking money for retirement anyway.
Tax-saving instruments are one input into your overall plan, not a separate exercise. The planner on this site works out your goal SIPs first; the 80C choice is then about routing part of that SIP through instruments that also cut your tax, without distorting the equity/debt balance your goals need.
Q. Is ELSS still worth it after LTCG tax?
A. Yes for long horizons. Gains up to Rs.1.25 lakh a year are exempt, and 12.5% on the rest is still low compared to the tax you would pay on fixed-income interest at your slab rate.
Q. Can I stop PPF before 15 years?
A. Partial withdrawals are allowed from year 7, and a full premature closure is possible after 5 years only in specific cases (serious illness, higher education) with a small interest penalty. Treat it as a 15-year commitment.
Q. Does NPS beat a normal equity fund for retirement?
A. NPS has very low costs and the extra deduction, but the forced annuity on 40% and its taxation are real drawbacks. Many people use NPS for the Rs.50,000 deduction and a normal equity fund for the bulk of retirement.
Q. New regime — should I still invest in these?
A. Invest, yes; but choose on returns and liquidity, not the deduction. A plain equity fund plus PPF usually makes more sense than ELSS and NPS once the tax break is gone.
Plan Our Future · AMFI-registered Mutual Fund Distributor (ARN-360754). Mutual Fund investments are subject to market risks, read all scheme related documents carefully.