Tax-Savings FD vs ELSS vs PPF: Which Is The Best Option For Investment?

loaan 1 1
loaan 1 1

As the cost of living is increasing day by day, individuals and families need to ensure saving money for the future. When you wish for a financially safe future, then you want to put significant effort towards investment and insurance. When you do proper financial planning, you can make sure your investment becomes meaningful, which will provide you with a lump sum in the future. 

Not just savings is essential, but investing in the right places, and the proper manner is necessary when you want good returns. Taxation is something which reduces a substantial part of your income, so when you want to ensure that you don’t lose much, you should invest in tax-efficient investment plans. In the Indian Income Tax Act, under Section 80 C, the government allows you to claim an exemption on your investment up to Rs.1.5 lakhs. 

There are many schemes and investment options which will help you with this, but ELSS, FD and PPF are the three primary options which people consider investing. You can try to understand all the three investment options better and figure out the best one that suits your requirements and plans.

Tax Saving Fixed Deposit:

When you are a person who doesn’t want to take the risk with investment, then a fixed deposit is the most significant investment option for you. When compared to other long term investment options, when you apply for a fixed deposit, you can be sure that your investment will be safe and you will get assured returns. 

The returns for a fixed deposit doesn’t depend on the market for its profits so that you will gain the assured returns. When you opt for tax saving fixed deposit, you can get additional benefit by claiming the tax exemption depending on your income slab. While filing your income tax, you should make sure to mention your fixed deposit under section 80 C.


  • A tax-saving fixed deposit has an in-lock period of five years before which you cannot cancel or withdraw your fixed deposit.
  • You are privileged to claim up to Rs.1.5 lakhs each year when you submit your claim under section 80 c.
  • When you are an individual or Hindu Undivided Families (HUF), you are eligible for opening the fixed deposit account.
  • When you open a joint account, only the first holder of the fixed deposit can claim for the tax deduction benefits.
  • The minimum and maximum amount which you can invest in this fixed deposit depend on the financial provider under whom you are investing. 
  • The interest rate for the fixed deposit also depends on the financial provider from whom you are getting your fixed deposit and the tenure which you are choosing for it.
  • Many financial providers are giving an additional increase in the interest rate for senior citizen deposits.
  • Premature withdrawals are not allowed with a tax-saving fixed deposit. In regular fixed deposits it will come along with a fine. 
  • TDS deduction will depend upon the income slab which you come under.

Equity Linked Savings Scheme (ELSS):

ELSS is a mutual fund type which offers tax exemptions under the Indian Income Tax Act. In this scheme, the majority of the corpus which you invest goes to be invested towards equities. This scheme depends on the market for its returns, so it’s a bit risky. The performance of the plan will also depend on your equities stock in the market. 


  • There is a mandatory three year lock-in period in this investment type before which you cannot cancel or withdraw it.
  • ELSS investment comprises two options – growth and dividend.
    • With growth, the entire corpus amount will be provided at the end of the maturity.
    • With the dividend option, you can get tax-free dividends even under the lock-in period.
  • There is no maximum amount of investment when considering ELSS, but you can only claim tax exemption up to Rs.1.5 lakh.
  • Even later to the lock-in period of three years, you can continue with the same investment if you want.
  • As these are dependent on the market for its returns, it is a bit higher risk when compared to other investment instruments.

Public Provident Fund (PPF):

PPF or Public Provident Fund scheme is a long-term investment option which will encourage individuals in saving for their secured future. PPF is a government based scheme which specialises on making a smoother and secured investment for individuals for their future. Any Indian resident can apply for this investment scheme. Even a PPF account can be opened for minors with either their parents or guardians as joint account holders.


  • PPF is a risk-free long term investment plan which is backed up with the support of the government.
  • The compulsory lock-in period for this investment type is 15 years which can be extended indefinitely for blocks of five years maturity.
  • The minimum investment for a PPF account is Rs.500 per year, and the maximum which you can invest is Rs.1.5 lakhs. 
  • Below section 80 c of the Indian Income Tax Act, you can claim up to Rs.1.5 lakhs for their contribution towards their PPF account.
  • It also offers a unique EEE tax benefit with which the interest earned and the amount received at the maturity will be exempt from tax.
  • The interest rate for a PPF account currently is 8% for which the interest will be compounded yearly.
  • You can contribute to your PPF account in a lump sum or instalments (If instalments should be contributing twelve instalments per year).
  • When you want to withdraw money before the tenure, you will be permitted to withdraw from the 6th year of your account starting. But 100% withdrawal is possible only at maturity.
  • When considering a PPF account, it can be opened on only one person’s name and cannot opt for a joint account. 
  • You can avail for a loan against your PPF amount when you require emergency funds.

Tax Saver FD vs PPF vs ELSS:

Tax saver FD:

Tax saver FD is a risk-free and safe investment option which is ideal for all investors who are conservative and don’t want to take the risk. There are many other investment options which are risk-free, but the tenure will be longer than this. Depending upon your financial provider, the interest rates on your fixed deposits vary. The interest which you gain from your fixed deposit is subject to TDS, so your effective rate of return will be lower.


When you are an individual who is ready to take higher risk and gain more from your long term returns, then the ELSS is a perfect solution for you. When you don’t want to put your investment directly in the equity market but want to invest, then it best suits you. ELSS also comes with a tax advantage. The average return which you can get on this scheme will be around 15 to 20%, depending upon the tenure you choose and the market instability. 


When you need fulfilling a long term financial goal, then a PPF is the best option for you. This option is suitable for everyone who is thinking about investing for their retirement. When you start a PPF account, you should invest in it continuously for 15 years at any number of times per year. The current interest rate on a PPF account is 8% which is one of the highest which you can get in the current market. 


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