Which is the Best Tax Saving Investment? - ELSS or National Saving Certificate
27 Dec 2016
Nutan Gupta
Equity Linked Saving Scheme (ELSS) and National Saving Certificate (NSC) are both tax-saving investments and are eligible for a tax deduction of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act. Listed below are some of the differences between ELSS and NSC.
|
ELSS |
National Saving Certificate |
Investment |
ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products. |
NSC are bonds issued by the government for small savings and one can purchase these bonds from post offices. |
Returns |
Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%. |
The interest rate on NSC is decided by the government every year. It is linked to the yield of 10-year government bonds.
The current interest rate is 8%. |
Lock-in Period |
3 years |
5 years |
Risk Factor |
ELSS carries some risk. However, research suggests that ELSS has given positive returns over a longer period of time. |
NSC carries low risk as the interest rate is fixed and it is backed by the Government of India. |
Tax Liability |
In ELSS, the amount received at the end of maturity is not taxable. |
Interest earned on NSC is taxable |
Liquidity |
One can withdraw money from ELSS anytime after 3 years. |
One can withdraw money from NSC anytime after 5 years. |
Minimum Investment |
Rs. 500 |
Rs. 100 |