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