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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