Tax planning is crucial for every taxpayer. With Equity Linked Savings Scheme (ELSS), you can get tax deductions of up to ₹1.50 lakh under Section 80C. Also, this financial product competes with options such as Five-Year Fixed Deposit (FD), Public Provident Fund (PPF) and National Savings Certificate (NSC).
Each one has its own set of benefits. Go through to understand how ELSS compares with others in 2025.
1) Lock-in period
If you need to use your money soon, ELSS works better. It locks your funds for just three years, which is the shortest among all Section 80C options. In contrast, PPF, holds your funds for 15 years. FD and NSC keep it locked for five years.
Opting for a shorter lock-in is better as it gives you more flexibility in scenarios of financial exigencies or better investment opportunities.
2) Returns
ELSS invests in the stock market, so returns can go up or down. While the past returns may vary based on the schemes selected, most ELSS has generated a high past returns than any other fixed-income options owing to its market-linked nature. PPF gives you a steady and safe return of 7.1%, which does not change with the market.
FDs and NSCs offer about 6-8% with minimal fluctuations. If you want higher returns and can handle the ups and downs, ELSS is a good option. For safe and steady returns, PPF or NSC is better.
3) Taxation
When it comes to taxes, ELSS returns are taxed only if your gains cross ₹1.25 lakh. After that, you pay a 12.5% tax on the profit. PPF is fully tax-free, which makes it the best for saving taxes. In NSC and FDs, the interest you earn is added to your income and taxed as per your tax slab.
If saving tax is your top priority, PPF is ideal. ELSS is better if you want growth along with some tax benefit.
4) Risk Factor
ELSS invests in stocks, which makes it riskier. The stock market can go up or down, so there is no guarantee of returns. PPF, NSC, and FDs offer fixed returns, which makes them safer. In 2025, with market uncertainties, taking some risk may give better returns.
If you are comfortable with risk for higher returns, ELSS is suitable. If you want peace of mind with steady returns, go for safer options.
5) Liquidity and Flexibility
Liquidity means how quickly you can get your money back when needed. ELSS allows you to withdraw money after three years. PPF lets you take out some money after five years, but with restrictions. NSC and FDs have strict rules, and early withdrawal often comes with penalties.
If you want quick access to funds after a short period, ELSS is more flexible. Safer options work better if you can wait longer.
Ending note
The right choice depends on what you need. ELSS offers higher returns and a short lock-in but comes with risks. PPF, NSC, and FDs are safer with lower but guaranteed returns. In 2025, mixing both risky and safe options can give you a balance of growth and security.
Diversifying your investments is a smart way to plan your taxes and secure your future. It also helps in managing market uncertainties while ensuring stable returns. Choosing the right mix based on your financial goals can maximise growth and minimise risk.
