Differences Between National Saving Certificate And Equity Linked Savings

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  • 28 Dec 2023
Differences Between National Saving Certificate And Equity Linked Savings

The introduction of the National Savings Certificate (NSC) in the 1950s aimed at accumulating funds for the nation's overall development by the Indian Government. Over time, however, the NSC evolved into an instrument for tax-saving investments. Investors who choose to invest in NSCs benefit from higher interest rates and the security of their investment and enjoy tax savings under Section 80C of the Income Tax Act.

Mastering saving income tax is crucial for those looking to optimise their tax savings. Administered by the Postal Services of India, these certificates can be acquired at any of its branches. They are available for purchase by adults for themselves, as well as for minors, and can also be obtained in joint names. Although NSCs have a lock-in period of 5-10 years, they can be used as collateral to secure loans from banks if liquidity is needed. While the interest on the investment is calculated annually, it is only paid to the investor upon maturity of their investment.

The Equity Linked Savings Scheme (ELSS) represents a category of mutual funds designed to encourage investors to engage in the stock market for moderate durations. This initiative offers tax advantages under Section 80C of the Income Tax Act. Being a type of mutual fund, ELSS provides investors with the expertise of seasoned professionals who manage their investments. Additionally, investors can capitalise on tax savings, with a relatively short lock-in period of three years for their investments to mature.

In contrast to other tools used for tax-saving purposes, which often require longer maturity periods or offer insufficient returns, ELSS stands out as a favorable option. Investors can extend their investment duration beyond three years if desired. Notably, parking funds in ELSS can be particularly advantageous for retirement planning. When considering the best options for retirement, individuals may compare PPF vs. ELSS to make an informed decision.

Key Difference Between ELSS and NSC

Parameters ELSS NSC
Investing in mutual funds that have exposure to the equity markets.
Small Savings Scheme
Lock In Period
3 years
5 Years
Deductions under Section 80C and a 10% Long-Term Capital Gains (LTCG) tax applicable on amounts exceeding Rs. 1 lakh.
Deductions are available under Section 80C, and interest is subject to taxation.
Risk Associated
Medium to high
Anticipating returns of 12-15% on long-term investments.
It compounded annually at a rate of 6.8%.

Which option is better, ELSS or NSC?

Both of these investment choices are widely used for tax-saving purposes. These investments' risk and return profiles vary significantly, making them suitable for different types of investors. Individuals with a higher tolerance for risk may find ELSS funds more appealing for their tax-saving requirements, given the potential for higher returns. On the other hand, investors who prefer lower risk may find NSC more suitable, as it offers stable and guaranteed returns on their investment.


The choice between Equity Linked Savings Scheme (ELSS) and National Savings Certificate (NSC) hinges on various factors, each catering to distinct investor preferences and financial goals. ELSS, as a category of mutual funds, appeals to those seeking moderate-duration stock market exposure coupled with tax advantages under Section 80C.

Managed by experienced professionals, ELSS provides flexibility with a relatively short lock-in period of three years, making it a favourable option for tax-saving purposes. Notably, it stands out for its potential to yield higher returns than traditional instruments.

FAQs on Difference Between National Savings Certificate and Equity Linked Savings

Equity Linked Savings Scheme is a mutual fund category encouraging stock market investments with tax advantages.

NSC provides stability, guaranteed returns, and tax savings under Section 80C.

NSC has a lock-in period of 5-10 years, while ELSS has a shorter lock-in period of 3 years.

Yes, NSC returns are subject to taxation.

Yes, both NSC and ELSS can be purchased for minors.

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