Which is the Best Tax Saving Investment? - ELSS or Pension Mutual Funds

Which is the Best Tax Saving Investment? - ELSS or Pension Mutual Funds

by Nutan Gupta Last Updated: 2022-12-16T10:15:08+05:30

Equity Linked Savings Scheme (ELSS) and Pension Mutual Funds are both tax-saving instruments 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 Pension Mutual Funds.

ELSS Pension Mutual Funds
Investment ELSS is a type of mutual fund scheme where most of the fund corpus is invested in equities or equity-related products. Pension Mutual Funds invest 40% of the money in equity and 60% in debt instruments. There are only 3 pension fund schemes:

- Reliance Retirement Fund
- Franklin Indian Pension Plan
- UTI Retirement Benefit Pension Fund
Returns Not fixed, depend upon the performance of equity market. However, in the past, ELSS has given average returns of 12-14%. The returns in pension mutual funds are not fixed as it depends on the performance of the equity and debt market. Pension mutual funds have given an average return of 8-10% for a 5-year and 10-year period.
Lock-in Period 3 years Until you reach the age of 58
Risk Factor ELSS carries some risk. However, research suggests that ELSS has given positive returns over a longer period of time. As the returns depend on the performance of market, there is some amount of risk attached with pension mutual funds.
Online Option One can start an ELSS online. One can invest in pension mutual funds online.
Liquidity One can withdraw money from ELSS anytime after 3 years. One cannot withdraw the funds before retirement. The standard retirement age is taken as 58 years.

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