When it comes to saving tax and building wealth, most salaried employees and business owners in India get confused between ELSS vs PPF vs NPS. All three are popular investment options, but they are very different in terms of returns, lock-in period, and risk. In 2025, with rising inflation and changing tax rules, choosing the right option is more important than ever.
This blog will explain ELSS (Equity Linked Savings Scheme), PPF (Public Provident Fund), and NPS (National Pension System) in a simple way, so that you can decide which is best for you.
Table of Contents
1. ELSS – Equity Linked Savings Scheme
- What is ELSS?
ELSS is a mutual fund that invests mainly in the stock market. It is the only type of mutual fund that gives tax benefits under Section 80C. - Tax Benefit:
You can claim up to ₹1.5 lakh deduction under Section 80C. - Lock-in Period:
Just 3 years – the lowest among all tax-saving investments. - Returns:
Since it is linked to the stock market, the average returns can be around 12–15% per year (but not guaranteed). - Risk Factor:
High risk, because it depends on market performance. But if you stay invested long term, it usually beats inflation and gives higher wealth creation. - Best For:
Young salaried employees, professionals, or anyone looking for high growth and short lock-in.
2. PPF – Public Provident Fund
- What is PPF?
PPF is a government-backed saving scheme available in banks and post offices. It is considered one of the safest tax-saving investments in India. - Tax Benefit:
Contribution up to ₹1.5 lakh per year is deductible under Section 80C.
Interest earned and maturity amount are also fully tax-free (EEE status – Exempt, Exempt, Exempt). - Lock-in Period:
15 years (with partial withdrawals allowed after 7 years). - Returns:
The current interest rate (2025) is around 7.1% per year, fixed by the government. - Risk Factor:
Very low risk – returns are guaranteed by the government. - Best For:
Conservative investors, people who want safe and tax-free returns for long-term goals like children’s education, marriage, or retirement.
3. NPS – National Pension System
- What is NPS?
NPS is a pension-focused investment scheme regulated by PFRDA (Pension Fund Regulatory and Development Authority). It invests in a mix of equity, government securities, and corporate bonds. - Tax Benefit:
- Deduction up to ₹1.5 lakh under Section 80C.
- Extra deduction of ₹50,000 under Section 80CCD(1B).
- This means you can save up to ₹2 lakh in tax every year.
- Lock-in Period:
Till the age of 60 years (with partial withdrawal allowed in special cases). - Returns:
Around 8–10% per year, depending on the equity exposure you choose. - Maturity Rules:
At retirement, you must use at least 40% of the corpus to buy an annuity (monthly pension), and the rest can be withdrawn as lump sum (tax-free up to 60%). - Risk Factor:
Moderate risk – since part of the investment goes into equity, but safer than pure stock market. - Best For:
Salaried employees planning for retirement and long-term wealth creation.
ELSS vs PPF vs NPS – Quick Comparison
| Feature | ELSS | PPF | NPS |
|---|---|---|---|
| Tax Benefit | ₹1.5 lakh (80C) | ₹1.5 lakh (80C) | ₹2 lakh (80C + 80CCD(1B)) |
| Lock-in | 3 years | 15 years | Till 60 years |
| Returns | 12–15% (market-linked) | 7.1% (fixed) | 8–10% (market + debt mix) |
| Risk | High | Very Low | Moderate |
| Liquidity | High (after 3 years) | Low (15 years) | Very Low (till retirement) |
| Best For | Young & aggressive investors | Safe & long-term savers | Retirement planners |
Which is Best in 2025?
- If you want high returns and short lock-in → Go for ELSS.
- If you want safe, guaranteed, and tax-free returns → Choose PPF.
- If you want retirement security and extra tax benefit → Opt for NPS.
Ideally, you should have a mix of all three:
- ELSS for growth,
- PPF for safety,
- NPS for retirement.
This way, you balance risk, returns, and tax saving effectively.
Final Words
In 2025, with inflation rising and expenses increasing, just saving money is not enough. You need to save tax and grow wealth at the same time. ELSS, PPF, and NPS are three powerful tools that help you achieve both goals.
Choose the right one depending on your age, risk appetite, and financial goals. Remember, tax planning is not only about saving money today but also about building a secure future tomorrow.
If you want professional support, then contact taxgiveindia.com.