Each investment option has benefits and drawbacks of its own, as does the industry it belongs to. Financial instruments that fall under the categories of debt, equity, and insurance include the Public Provident Fund (PPF), Unit Linked Insurance Plan (ULIP), and Equity Linked Savings Scheme (ELSS), respectively.

Taxpayers should contrast them as they are all eligible for Section 80C tax deductions. Before making an investment, investors should carefully analyze all pertinent factors because, aside from tax benefits, each of these vehicles has its own set of benefits and disadvantages. To provide taxpayers with financial stability as they enter the New Year, we studied ULIP, PPF, and ELSS and conferred with industry experts.

What is ELSS?

In simple terms, if you want to invest your money in mutual funds & also want to save taxes then ELSS should be your go-to avenue. The Equity Linked Saving Scheme or ELSS is a diversified, equity mutual fund that invests in the capital market and selects companies with different market capitalizations. In a financial year, an investor can claim a tax saving under section 80C of the Income Tax Act &get deductions of up to Rs. 1,50,000 against investments made in ELSS.

What is ULIP? 

When the purpose of your investment is wealth creation that covers your life then one of the best avenues to invest your money is Unit Linked Insurance Plan, popularly known as ULIP. This is a specially designed investment plus insurance product where a part of your investment is used to insure you, while the remaining is invested in the products of your choice - this can be a healthy mix of equity, debt, and hybrid funds. ULIP can also help you save taxes, as the premium paid is eligible for a tax deduction under Section 80C. And guess what, when the policy matures, the returns are exempt from income tax under Section 10(10D) of the Income-tax Act. However, the best part about ULIP is that you can choose to switch from equity to debt or hybrid as per your investment objective during the lifecycle of the investment.

What is PPF?

With an aim to mobilize the small savings as investments, coupled with a decent return - PPF or Public Provident Fund was introduced in the country in 1968. Decades later, it still remains a favorite savings avenue for many investors. And one of the major reasons this is still a hot investment option is its ‘saving + tax saving’ nature. If you want to invest in a safe investment option with decent gradual guaranteed returns and savings taxes, then you should open a PPF account. One thing to keep in mind is the lock-in period which is 15 years! However, there are many benefits to investing in PPF. It’s a tax-saving scheme. The 80-C section provides PPF with EEE benefits (Exempt, Exempt, Exempt) which means that investments up to Rs. 1.5 lakhs per year, the returns you earn, and the corpus when the fund matures are all exempted from taxation.


In addition to providing Section 80C advantages of up to Rs 1.5 lakh per year, all three investment options—ELSS, PPF, and ULIP—produce positive returns for investors. But determining which of these three choices offers the most tax benefits and investment returns depends on a number of factors, including:

  • Liquidity: ULIP and PPF have lock-in periods of five years and fifteen years, respectively; ELSS has the lowest lock-in period of just three years. Before making an investment in any of the tax-saving investment techniques, it is also advisable to consider your liquidity needs.
  • Expenses:Due to SEBl's constrained expenditure ratio constraints, whereas LIPs do not, ELSS offers the benefit of low expenses and skilled management. The costs of ULIP schemes may be much greater than those of mutual funds. In addition to their investment, the investor just has to pay a one-time cost of $100 for PPF.
  • Risk coverage: ULIPs come with an integrated insurance plan that pays the promised amount to the family in the event of the policyholder's passing during the policy's term.However, there are no risks associated with mutual funds or PPF that can be covered by insurance.
  • Return on Investment: Unlike ELSS and ULIP, which are both market-linked investment options, PPF does not offer assured, set, or tax-free returns.Currently, PPF interest rates are 7.1% annually. The average return on ELSS is 17.19% for periods of three years and 11.10% for periods of five years, respectively.

It is advised to stretch out your investment over a medium to long-term period, and buy a combination of PPF and ELSS. A term plan with suitable risk coverage that is at least 10 to 15 times your annual income is also recommended.

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