What is ELSS vs PPF Calculator?
The ELSS vs PPF Calculator is a comprehensive financial tool designed to help Indian investors compare two of the most popular tax-saving investment options under Section 80C of the Income Tax Act. Both ELSS (Equity Linked Savings Scheme) and PPF (Public Provident Fund) offer tax deductions up to Rs.1.5 lakh per year, but they differ significantly in returns, risk, and lock-in periods.
Our calculator performs detailed post-tax return analysis, considering ELSS LTCG (Long Term Capital Gains) taxation and PPF's EEE (Exempt-Exempt-Exempt) status to give you a true comparison of wealth creation potential over your investment horizon.
ELSS (Equity Linked Savings Scheme)
ELSS is a type of equity mutual fund that offers tax benefits under Section 80C. Key features include:
- Shortest Lock-in: Only 3 years among all 80C investments (PPF: 15 years, Tax-saving FD: 5 years)
- Higher Return Potential: Being equity-based, ELSS has historically delivered 12-15% CAGR over long periods
- Market-Linked Risk: Returns are not guaranteed and depend on stock market performance
- LTCG Tax: Gains above Rs.1.25 lakh in a financial year are taxed at 12.5%
- Flexible Investment: No upper limit, invest any amount via SIP or lumpsum
PPF (Public Provident Fund)
PPF is a government-backed savings scheme offering guaranteed returns. Key features include:
- Government Guarantee: 100% safe, backed by sovereign guarantee of India
- EEE Status: Investment, interest, and maturity all tax-free
- Fixed Returns: Currently 7.1% p.a., revised quarterly by the government
- 15-Year Lock-in: Mandatory 15-year tenure with partial withdrawal after 7 years
- Investment Limit: Minimum Rs.500/year, Maximum Rs.1.5 lakh/year
How Does This Calculator Work?
The ELSS vs PPF calculator uses sophisticated financial modeling to provide accurate comparisons:
- Input Parameters: Enter your monthly investment, expected ELSS returns, PPF rate, investment duration, and tax bracket
- Compounding Calculation: ELSS uses monthly compounding (market-linked), PPF uses annual compounding (govt rate)
- Tax Impact Analysis: Calculates ELSS LTCG tax (12.5% on gains above Rs.1.25L) and PPF tax-free benefit
- 80C Tax Savings: Shows total tax saved under Section 80C for both investments
- Year-wise Breakdown: Visualizes growth trajectory for informed decision-making
ELSS vs PPF: Detailed Comparison
Return Comparison: Historical Data
Historical returns play a crucial role in investment decisions. Here is how ELSS and PPF have performed:
- ELSS (Last 10 Years): Top ELSS funds have delivered 14-18% CAGR. Category average is around 12-13%
- PPF (Last 10 Years): Rates have ranged from 7.1% to 8.7%, with current rate at 7.1%
- Real Returns: After adjusting for 6% inflation, ELSS offers 6-9% real returns vs PPFs 1-2%
Risk Assessment
Understanding risk is essential for choosing the right investment:
- ELSS Risk: High volatility, NAV can drop 30-50% in market crashes, but recovers over long term
- PPF Risk: Zero market risk, only inflation risk (returns may not beat inflation in some years)
- Risk-Adjusted Returns: For 10+ year horizons, ELSSs higher returns typically compensate for volatility
Liquidity and Flexibility
Both investments have different liquidity characteristics:
- ELSS: 3-year lock-in per SIP installment, fully liquid after lock-in, can redeem anytime
- PPF: 15-year mandatory tenure, partial withdrawal (50%) allowed from 7th year, loan facility from 3rd year
- Emergency Access: ELSS is more accessible for emergencies due to shorter lock-in
Tax Treatment: ELSS vs PPF
Section 80C Benefits
Both ELSS and PPF qualify for tax deduction under Section 80C up to Rs.1.5 lakh per year. Tax savings depend on your tax bracket:
- 30% Bracket: Save up to Rs.45,000 + 4% cess = Rs.46,800 per year
- 20% Bracket: Save up to Rs.30,000 + 4% cess = Rs.31,200 per year
- 5% Bracket: Save up to Rs.7,500 + 4% cess = Rs.7,800 per year
ELSS Taxation (Capital Gains)
ELSS gains are subject to LTCG tax after the 3-year lock-in period:
- LTCG up to Rs.1.25 Lakh: Completely tax-free in a financial year
- LTCG above Rs.1.25 Lakh: Taxed at 12.5% (previously 10% above Rs.1 lakh)
- No Indexation Benefit: Unlike debt funds, ELSS does not get indexation benefit
- Tax Planning Tip: Stagger redemptions across financial years to maximize Rs.1.25L exemption
PPF Taxation (EEE Status)
PPF enjoys complete tax exemption at all stages:
- Investment: Tax deduction under Section 80C
- Interest: Annual interest is completely tax-free
- Maturity: Entire maturity amount is tax-free, no capital gains tax
- Effective Post-Tax Returns: For 30% bracket investors, PPFs 7.1% equals roughly 10.1% pre-tax returns
Who Should Choose ELSS?
ELSS is ideal for investors who meet the following criteria:
- Long Investment Horizon: Can stay invested for 7-10+ years to ride out market volatility
- Higher Risk Tolerance: Comfortable with 20-30% interim portfolio fluctuations
- Wealth Creation Goal: Primary objective is long-term wealth creation, not capital preservation
- Young Investors: Those in their 20s-30s with time to recover from market downturns
- SIP Discipline: Can commit to regular monthly SIP without panic redemption during crashes
- Need for Liquidity: May require access to funds after 3 years for specific goals
Who Should Choose PPF?
PPF is suitable for investors with the following profile:
- Conservative Risk Appetite: Cannot tolerate any capital loss, prioritize safety over returns
- Retirement Planning: Looking for guaranteed income during retirement years
- Fixed Income Component: Want a stable, fixed-income asset in their portfolio
- High Tax Bracket: 30% bracket investors benefit most from EEE status
- Long-Term Commitment: Comfortable locking funds for 15 years
ELSS and PPF Together: The Balanced Approach
Many financial advisors recommend a combination of both ELSS and PPF for optimal tax-saving portfolio:
- Asset Allocation: 60-70% in ELSS for growth, 30-40% in PPF for stability
- Rebalancing: Shift more to PPF as you approach retirement age
- Risk Management: PPF acts as a hedge against ELSS volatility
- Liquidity Planning: Use ELSS for medium-term goals (5-7 years), PPF for retirement
Sample Portfolio Allocation by Age
- Age 25-35: ELSS 80%, PPF 20% (High risk capacity, long horizon)
- Age 35-45: ELSS 60%, PPF 40% (Moderate risk, family responsibilities)
- Age 45-55: ELSS 40%, PPF 60% (Lower risk, retirement approaching)
- Age 55+: ELSS 20%, PPF 80% (Capital preservation priority)
Frequently Asked Questions
Which is better for tax saving: ELSS or PPF?
Both offer the same tax deduction under Section 80C (up to Rs.1.5 lakh). ELSS typically generates higher returns (12-15%) but with market risk, while PPF offers guaranteed 7.1% with zero risk. For young investors with 10+ year horizon, ELSS is usually better. For conservative investors or those near retirement, PPF is safer.
What is the lock-in period for ELSS and PPF?
ELSS has a 3-year lock-in period (shortest among all 80C investments). Each SIP installment is locked for 3 years individually. PPF has a 15-year lock-in period, with partial withdrawal allowed from the 7th year. PPF can be extended in 5-year blocks after maturity.
Are ELSS returns taxable?
Yes, ELSS gains are subject to Long Term Capital Gains (LTCG) tax. Gains up to Rs.1.25 lakh in a financial year are tax-free. Gains above Rs.1.25 lakh are taxed at 12.5% (without indexation benefit). You can stagger redemptions across financial years to minimize tax.
What is EEE status in PPF?
EEE stands for Exempt-Exempt-Exempt, meaning: (1) Investment is exempt (80C deduction), (2) Interest earned is exempt (no annual tax), (3) Maturity amount is exempt (no capital gains tax). PPF is one of the few instruments with full EEE status in India.
Can I invest in both ELSS and PPF?
Yes, you can invest in both ELSS and PPF. However, the combined deduction under Section 80C is capped at Rs.1.5 lakh per year. Many investors split their 80C limit between both to balance risk and returns. A common allocation is 60% ELSS and 40% PPF for young investors.
What is the current PPF interest rate?
The current PPF interest rate is 7.1% per annum (as of FY 2024-25). PPF rates are revised quarterly by the government based on G-Sec yields. The rate has ranged between 7.1% and 8.7% in the last decade.