National Pension System (NPS) vs ELSS: Which is better? Check comparison, expert view
When you are earning income and paying
off your taxes well, the government cushions you with some saving
options. Under Section 80C, a number of instruments help you save taxes.
These include ELSS, NPS, NSC, PPF, EPF, SSY, 5 years FD and so on.
you are earning income and paying off your taxes well, the government
cushions you with some saving options. Under Section 80C, a number of
instruments help you save taxes. These include ELSS, NPS, NSC, PPF,
EPF, SSY, 5 years FD and so on. The government has offered more tax
benefits, relaxed investment norms and made withdrawal rules more
lenient in the past 10 years, making it easier for the working class to
invest. Let's compare two of the popular saving schemes ELSS and
National Pension System.
Pooja Bhinde, Certified Financial Planner, told Zee Business TV, "The
taxpayer can get exposure to both equity and save taxes in case of ELSS
which provides you tax saving up to Rs 1,50,000 while NPS is retirement
cover and tax saving scheme, with tax saving up to Rs 1.5 lakh and
additional Rs 50,000 tax saving.'' Here is the detailed comparison of both the instruments - ELSS and NPS:
What is ELSS?
Equity Linked Savings Scheme (ELSS) is a tax saving mutual fund which
allows you to save up to Rs. 1.5 lakh in a financial year under Section
80C of the Income Tax Act. It has the lowest lock-in period, i.e 3
years but comes with a Long Term Capital Gains Tax (LTCG) of over Rs 1
lakh being taxed at the rate of 10 on annual gains. ''ELSS provides an
annual return of 12-15 per cent, which post-LTCG taxation becomes 10 to
11 per cent, more than any other scheme in 80C,'' Bhinde said.
What is NPS?
National Pension System (NPS) is a government-sponsored scheme in
which individuals can invest during their earning years in order to get
pension upon retirement. The investment in NPS also offers a tax
deduction of Rs. 1.5 Lakh under Section 80C of the Income Tax Act and an
additional deduction of Rs. 50,000 under Section 80CCD (1B).
Features of ELSS:
1. ELSS has a 3 year lock-in period, which makes it the scheme with the lowest maturity period.
2. The entire amount of ELSS is invested in equities in diversified ways, which is regularly monitored and watched.
3. The person can invest as low as Rs 500 as a lump sum or as a SIP investment for ELSS investments.
4. The Long Term Capital Gain Tax (LTCG) over Rs 1 Lakh is taxable at 10% on the gains from ELSS.
5. A tax deduction of up to Rs 1,50,000 lakh p.a under Section 80C of the Income Tax Act is allowed. Watch this Zee Business TV video to know more about ELSS and NPS: