NPS, ELSS, and FD: A Comprehensive Comparison

Before you invest in any program, you should make a list of your financial goals and objectives. Then, establish your investment horizon. Finally, match your goals to your investing objectives. Then you may choose the investments that are ideal for you. ELSS funds are suitable for both short and long-term objectives. They also provide better returns than NPS. They do, however, have a larger risk than NPS. Unlike NPS, ELSS funds have a three-year lock-in period and are tax-deductible under Section 80C. NPS is more suited for long-term goals such as retirement planning. They, unlike ELSS, tend to provide consistent returns. The NPS program, on the other hand, has a lock-in duration of up to 60 years. In addition, investments in NPS qualify for tax breaks under Sections 80C and 80CCD of the Income Tax Act. Individuals can claim a tax deduction of up to Rs.1,50,000 in a fiscal year by investing in fixed deposits with banks. These deposits have a five-year lock-in duration. This deposit, however, cannot be withdrawn prematurely. However, one advantage is that you may borrow against your FDs. The interest collected on these deposits, however, is taxed according to the individual's tax bracket. 

The Significant Differences Between NPS, ELSS, And FD

The following are some major distinctions between financial investment programmes such as NPS, ELSS, and FD -

1. National Pension Scheme (NPS)

The National Pension Program (NPS) is a government-sponsored scheme, making it a safer investment alternative for people. The plan was originally made available to government employees in January 2009, when it was introduced. However, the plan was subsequently expanded to everybody in 2009. This system allows insured persons to contribute to a pension account on a recurrent basis throughout their working lifetimes. Individuals who are insured have the option of taking a portion of their money in a lump sum and using the remaining to purchase an annuity to assure a consistent income when they retire. According to experts, even working professionals in the unorganized sector can benefit from this program in order to obtain a pension when they retire. Even when the Rs 1.5 lakh limit in this pension plan is achieved, this program offers the benefit of tax savings under Section 80C. Investment in NPS also entitles the person to an additional Rs 50,000 deduction. Furthermore, no matter how much money is put in the NPS, the person is guaranteed a minimum pension.

2. Equity-Linked Savings Plan (ELSS)

Equity Linked Savings Program (ELSS) is an open-ended equity mutual fund scheme that is also one of the most 
productive tax-saving solutions, with investments starting at Rs 500. This program requires a three-year lock-in period from the date of investment. Individuals can invest up to 65 percent of their money in the stock market under this strategy. The interest rate paid on ELSS investments is proportionate to market performance. Additionally, investments in this program qualify for a tax credit under section 80C and are categorized as EEE. This program is recommended by experts for those wishing to invest for a longer period of time, ranging from 5 to 7 years.

3. Senior Citizens Savings Program (SCSS)

The Older People Savings Scheme (SCSS) was created exclusively for India's senior citizens. This program offers insured persons a consistent stream of income while simultaneously delivering the highest level of safety and tax savings. It is a wonderful investment opportunity for anyone over the age of 60. This system includes a government-sponsored retirement initiative. Senior adults in India can invest a large sum in the scheme, either individually or collectively, and get a regular source of income as well as tax breaks.

Endnotes

When evaluating possibilities for saving taxes under Section 80 C, it is critical for an individual to keep elements such as risk profile, financial objectives, returns, and so on in mind. It is critical to choose a strategy based on expected profitability, risk tolerance, and time horizon. Tax planning is an important aspect of personal finance, and it is critical to select a strategy that is tailored to an individual's needs.