When making retirement plans, an investor should employ a variety of asset classes and investment products within specific asset classes. Mutual funds in India provide a diversified equity investing plan called the Equity Linked Savings Scheme. Each of the three investment vehicles-ELSS, PPF, and NSC-has unique benefits. Because they offer a larger potential return and a shorter lock-in time than National Savings Certificates (NSC) and Public Provident Funds (PPF), Equity-Linked Savings Schemes (ELSS) could be a better option for retirement planning.

Although PPF and NSC provide stability and security, their lower returns make them less suitable for building long-term wealth. ELSS can offer superior performance for long-term, risk-taking investors, allowing them to build a larger retirement fund. Choosing the appropriate investment is crucial for long-term financial stability while making retirement plans. Under Section 80C, the National Savings Certificate (NSC), Public Provident Fund (PPF), and Equity Linked Savings Scheme (ELSS) are well-liked tax-saving choices with unique advantages.

PPF Is Safe, NSC Is Steady, ELSS Is Wealth-Building-Which One Are You Choosing?

Equities are high-risk and high return investments. Based on statistical data of Indian equities since inception, we have seen that risk in equities comes down as the time period increases. Sensex has given a CAGR return of about 14% since its inception in 1979 and has beaten all other asset classes including PPF and NSC during this period, as per Mr. Gaurav Goel, (Entrepreneur and SEBI Registered Investment Advisor).

“Equity Linked Savings Scheme is a diversified equity investment scheme offered by Mutual Funds in India. They also provide tax benefits under the old tax regime as the investment offers benefits under section 80C of Income Tax Act of India 1961. Such schemes usually have a lock in period of 3 years. This is a great for a fund manager as he does not face redemption pressure in the lock in period and can plan investments from a long-term perspective matching with the lock in period of the scheme,” said Gaurav Goel.

An Investor planning for his retirement should use different asset classes as well as different investment products within the asset class. ELSS, PPF and NSC are all different instruments of investments and have different advantages. ELSS is likely to provide higher returns as compared to NSC and PPF although it has a higher risk associated with it. Risk gets slightly mitigated due to the lock in period. Higher returns help in reaching retirement goals more efficiently. Long term retirement planning gets even higher benefits through ELSS returns as compounding benefits kick in, according to Gaurav Goel.

Want to Retire Richer? ELSS Can Help You Get There Faster Than PPF or NSC

Equity-Linked Savings Schemes (ELSS) may prove to be a superior choice for retirement planning as against Public Provident Fund (PPF) and National Savings Certificate (NSC) since they have higher return potential as well as less lock-in period. ELSS invests heavily in equity markets, which over the long term have given a return of 12-15%. PPF and NSC provide fixed returns, usually in the range of 7-8%. On a long investment horizon of 15-20 years, this differential in returns can make a huge difference to wealth creation, commented Swapnil Aggarwal, Director, VSRK Capital.

“A second major benefit of ELSS is its lock-in period of only three years. Compared to PPF, which locks money for 15 years, and NSC, which demands a five-year commitment, ELSS is a more liquid option for investors who might need money earlier. While NSC and PPF offer security and stability, they are not necessarily the best option for long-term wealth generation because of their lower returns. For risk-taking investors with a long-term investment horizon, ELSS can provide better growth, enabling them to create a bigger retirement corpus. With the help of compounding and equity market appreciation, ELSS is an effective retirement planning tool,” Swapnil Aggarwal stated.

ELSS, PPF or NSC? Compare Tax Benefits, Lock-In & Returns Before You Invest

“When planning for retirement, selecting the right investment is essential for long-term financial security. Equity Linked Savings Scheme (ELSS), Public Provident Fund (PPF), and National Savings Certificate (NSC) are popular tax-saving options under Section 80C, each with distinct benefits. ELSS offers the highest return potential, averaging 12%, compared to PPF’s 7.1% and NSC’s 7.7%. It also has the shortest lock-in period of three years, whereas PPF requires 15 years and NSC five years, making ELSS more flexible. In terms of taxation, PPF returns are completely tax-free, NSC interest is taxable, and ELSS gains above ₹1 lakh are taxed at 10%,” said Rohit R Chauhan – Founder – Ingood Finserv Private Limited.

The wealth-building potential further sets ELSS apart. Investing ₹1.5 lakh annually for 20 years could grow to ₹1.08 crore, whereas PPF would yield ₹62.28 lakh. While PPF and NSC offer stability, their lower returns limit long-term growth. For investors with a moderate risk tolerance and long-term horizon, ELSS stands out by combining growth and tax efficiency, making it a compelling alternative for maximizing returns while benefiting from tax savings, Rohit R Chauhan further commented.

PPF Offers Peace. ELSS Offers Prosperity-What’s Your Retirement Goal?

“Selecting an investment that strikes a mix between growth, flexibility, and tax advantages is crucial when making retirement plans. ELSS (Equity-Linked Savings Scheme) is a better option with higher yields and a shorter lock-in period, even though PPF and NSC are steady. Due to its equity investments, ELSS has historically produced returns of 10-15% annually, beating NSC (6-7%) and PPF (7-8%). This increases the likelihood that your money will increase in value over time,” said Pankaj Dhingra, CA, US CPA, Managing Partner, FinTram Global LLP.

Additionally, ELSS offers you more freedom with a 3-year lock-in as opposed to PPF’s 15-year and NSC’s 5-year lock-ins. All three are eligible for Section 80C tax deductions, but ELSS also protects your savings from depreciating over time by preventing inflation. ELSS is the best option for building long-term wealth, even though PPF is safer, Pankaj Dhingra further added.

ELSS May Grow 2X More Than PPF & NSC-But Is It the Right Pick for You?

“ELSS can beat PPF and NSC for retirement planning, but when considered, all three have their own benefits and drawbacks. ELSS may generate higher returns, but it comes with volatility where proper fund selections are required. Now choosing between PPF and NSC which ensures capital safety but does not beat inflation-adjusted returns. In addition, ELSS has a three-year lock-in period. If you invest ₹8,300 a month for 15 years at a 15% interest rate, you will have invested ₹15 lacs over the course of 10 years, which will yield ₹51,36,790 after 15 years,” as per Trivesh, COO Tradejini.

“Whereas the National Saving Certificate (NSC) is compounded once a year. The investor will get the interest at the conclusion of the five-year period. Every year, the interest gained is reinvested. Lock-in period of 5 years when invested 15 lacs per year ₹ 1 lac for 5 years maturity amount ₹21,73,771 at an interest rate of 7.7%. But when considering the Public Provident Fund (PPF) lock-in period of 15 years, after which the account can be matured and the accumulated funds can be withdrawn. When ₹1 lakh is invested for 15 years at 7.1% and the maturity amount received is ₹2,712,139,” Trivesh further added.

Moreover, ELSS, PPF, and NSC offer tax benefits, but PPF provides tax-free returns. Tax Deduction Under Section 80C, investments in ELSS and NSC are eligible for a deduction of up to ₹1.5 lakh per year. The choice between all of them requires balancing risk, taxation, liquidity, and long-term goals, rather than focusing solely on returns. A well-planned mix can optimize both wealth creation and financial security, as per Trivesh.

Why ELSS Wins Every Time for Long-Term Retirement Planning?

“To plan for a long-term goal like retirement by investing in PPF or NSC can be one of the gravest financial planning mistakes. Retirement, being a long-term goal, needs investments that are aggressive to generate inflation-beating returns. Equity Linked Savings Scheme (ELSS) Mutual Funds stand out as a superior choice due to its equity exposure, offering the potential for significantly higher returns compared to the fixed and relatively low returns of PPF and NSC,” said Mayank Bhatnagar, Co- Founder, COO, FinEdge.

“Imagine being locked in a PPF or NSC with a 7.5% return versus the potential of an equity-linked fund delivering around 13% over a long investment period. The difference in compounded returns can be substantial. Let me give an example: If you invested ₹1.5 lakh every year for 15 years in a PPF scheme, you would accumulate a corpus of approximately ₹40 lakhs. However, a SIP of ₹12,500 per month for 15 years in an ELSS tax-saving fund could create a corpus of almost ₹70 lakhs,” commented Mayank Bhatnagar.

The power of compounding and higher equity returns make ELSS a much better choice for long-term wealth creation. Besides high growth potential, ELSS enjoys tax benefits under Section 80C, a shorter lock-in of three years and tax efficiency. ELSS Funds are not just investments to save tax but are also very effective to achieve long term goals like Retirement, Mayank Bhatnagar further added.

Conclusion

If you’re planning for retirement, PPF and NSC might seem like the go-to options. But here’s the thing-while they offer fixed returns and seem safe, they may not always beat inflation in the long run. If you’re willing to take on a bit more risk, ELSS, which invests in equities, has the potential for much higher growth. Plus, ELSS has a lock-in period of just three years compared to PPF’s 15 years, giving you more flexibility. So, if you’re okay with some market fluctuations, ELSS can help you build a bigger retirement fund, commented Rohith Vedira, Co-Founder Sathpay.