- 4 min read•
- 1,156•
- Published 18 Dec 2025
Key Highlights
-
Equity-Linked Savings Schemes (ELSS) is a tax-saving mutual fund. It mainly invests in equities. Whereas, Public provident Funds (PPF) is a long-term savings and investment scheme offered by the Indian government.
-
ELSS funds invest in equities. They have a lock-in period of three years. Investors can start with a monthly investment as low as Rs. 500.
-
PPF has a lock-in period of 15 years. The scheme offers a fixed interest rate and allows for premature withdrawals after the sixth year.
-
PPF has very low risk, while ELSS involves market-linked risks due to equity investments.
-
You can invest in PPF through post offices and banks. ELSS funds are offered by Asset management companies (AMC).
What are ELSS Funds
Equity-linked savings scheme (ELSS ) is the only type of mutual fund that is covered under section 80c of the Income Tax Act. ELSS funds mostly invest in equity. So, the performance depends on the market conditions. The tax-saving mutual fund helps you build long-term wealth. It also reduces your taxes. This makes it a good choice for an investor with long-term objectives.
ELSS offers the lowest lock-in time of three years and the largest gain of 12% and above. This makes it a better option when compared to other investments. Additionally, you may start investing with Rs. 500 per month in a well-diversified portfolio.
What is PPF
The Public Provident Fund (PPF) is a long-term savings and investment scheme offered by the Indian government. It is appropriate for long-term financial objectives like retirement planning and the education of children. With PPF you may get tax deductions up to Rs 1.5 lakh under section 80C. The lock-in term is 15 years. It can be extended for 5 more years. However, from the sixth year onward, you get the option of premature withdrawal.
Investors are allowed to avail of loans on PPF accounts. This facility is open from the third to the end of the sixth year. The loan has a 36-month repayment period. It is fixed at 25% of the total amount of the previous two years. The interest is usually 2% higher than existing rates.
Difference Between ELSS and PPF
Let’s now look at the noteworthy difference between ELSS and PPF based on various parameters. The following table captures the key points on ELSS vs PPF.
Tenor | Can be withdrawn anytime without any monetary loss. | Sudden withdrawal might attract charges, penalties, or might just not be allowed. |
Earnings | Earns better during market lows. Investment yields higher returns because of the power of compounding. | Earns better during market highs. The investment yields fixed income, which is lower than SIP. |
Protection from Market Volatility | SIP can protect your investment from any potential market crash. | A one-time investment is not cushioned against market volatility. As such, this investment could be a major loss if the market crashes. |
Knowledge of Market | This is a simple plan, and you are not required to know the market thoroughly. | In many cases, one-time investments may require expert counsel or a piece of thorough market knowledge. |
Conclusion
PPF and ELSS funds offer a unique set of advantages. PPF offers lower returns, but it is quite safe. On the other hand, ELSS funds may give higher returns than PPF. However, ELSS funds are more risky. PPF is a good choice for low-risk investors. It is a tax-saving fund with no credit risk. So, you should consider your investment objectives and risk appetite while choosing between the investment options. Moreover, you may invest in both schemes. This will help you create a more balanced portfolio. You can enjoy the benefits of higher returns from ELSS and the safety of PPF.
