NPS vs ELSS vs PPF: Where Does Your Money Work The Hardest? Returns, Risk And Taxes Compared

Investments have always been considered a secure and reliable option when it comes to building long-term savings. Among the most popular options are NPS (National Pension System), ELSS (Equity Linked Savings Scheme) and PPF (Public Provident Fund), for their dual benefit of wealth accumulation and tax benefit.

Every investment plan comes with its own set of risks, returns and tax benefits. You can choose among NPS, PPF and ELSS as per your financial goals and risk appetite.

Let's understand the key details about all three schemes and what could be most suitable for your financial needs.

What is NPS (National Pension System)?

NPS is a government savings scheme that allows a person to invest a portion of their income for their post-retirement life. You have to regularly invest your money in the NPS account, which is then invested in shares, bonds and other assets.

Over time, the money grows and when you retire, you can withdraw 60% of the amount as a lump sum and the rest you can use as a monthly pension.

What is ELSS (Equity Linked Savings Scheme)?

ELSS is a type of mutual fund where you invest your money mainly in equities. It is also one of the most popular tax-saving investment options among mutual fund schemes. You can withdraw the amount after three years of investment.

Once the 3-year lock-in period is over, you can either withdraw all your money at once, withdraw a part of it and keep the rest invested, or set up a systematic withdrawal plan where you get a fixed amount every month.

What is PPF (Public Provident Fund)?

PPF is a government-backed long-term savings scheme. The primary objective of the PPF scheme is to help investors save money for the future and build a tax-free retirement corpus over time. It has a fixed investment tenure of 15 years, which can be increased in blocks of 5 years each.

Since both the principal invested and the interest earned are tax-free, this investment product is classified as an EEE (Exempt-Exempt-Exempt). Every year, you deposit some amount into your PPF account. You can withdraw the full amount only, while partial withdrawals are allowed after 7 years.

NPS vs ELSS vs PPF: Risks, Returns And Tax benefits

ELSS offers the highest returns as it is entirely due to market volatility, but also carries the highest risk as it is equity-based. NPS provides moderate returns with a balanced risk profile and offers additional tax benefits. PPF, in contrast, is the safest option with fixed returns and the tax earned on both the interest and maturity amount is fully exempt.