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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