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