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Which is the Best Tax Saving Investment? - ELSS or National Saving Certificate

07 Aug 2019 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

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Which is the Best Tax Saving Investment? - ELSS or National Saving Certificate

07 Aug 2019 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