Choosing the Best Tax Saving Fund for 20 Years: PPF vs ELSS

When it comes to tax-saving investments, the question of which fund is the best often arises. In this article, we will explore the performance of some of the leading tax saving funds in India, focusing on a 20-year investment period, specifically comparing Personal Provident Fund (PPF) with Equity Linked Savings Scheme (ELSS) funds.

Comparing PPF and ELSS Funds Across Different Periods

It's important to compare different types of tax-saving funds over the same time frame for accurate assessments. Many investors tend to compare a 15-year PPF with a 3-year ELSS, which is not entirely fair. Instead, we should examine the performance across similar time periods.

Aditya Birla Sun Life Tax Relief 96 G

Aditya Birla Sun Life Tax Relief 96 G is one of the notable ELSS funds. If you had started a systematic investment plan (SIP) of INR 5000 per month from 1st May 2008 to 1st May 2018, a 10-year investment period, you would have invested INR 6.05 lacs. Over this period, the fund offered an annual return of 17.45%, resulting in a corpus of INR 15.2 lacs. This performance is quite impressive and highlights the potential of ELSS funds when held for a longer duration.

HDFC Tax Saver Fund

HDFC Tax Saver G is another leading ELSS fund. Starting a SIP of INR 5000 per month from 1st May 2003 to 1st May 2018, a 15-year investment period, you would have invested INR 9.05 lacs. Over this period, the fund delivered an annual return of 16.74%, resulting in a corpus of INR 36.4 lacs. This fund demonstrates the long-term potential of ELSS investments, showing that they can substantially increase your wealth over an extended period.

UTI Long Term Equity Fund

UTI Long Term Equity G is a well-performing ELSS fund. Starting a SIP of INR 5000 per month from 1st May 2006 to 1st May 2018, a 12-year investment period, you would have invested INR 7.25 lacs. Over this period, the fund provided an annual return of 11.56%, resulting in a corpus of INR 15.1 lacs. This fund also highlights the long-term potential of ELSS investments, though it has not performed as well as was observed in some of the other funds mentioned.

PPF as a Secure Investment Option

While ELSS funds can offer significantly higher returns, the Personal Provident Fund (PPF) has its own advantages:

Safety and Secured Returns

The PPF is a government-backed scheme, which makes it one of the safest investment options. Since the government is the guarantor, the principal and interest are secured. It is a debt instrument, so returns are lower compared to equity funds. However, for those looking for guaranteed returns, PPF is an attractive option.

Lock-In Period

PPF has a 15-year lock-in period from the date of subscription, which benefits people who prefer to lock in their money for a long-term. This ensures that the funds are not withdrawn at the slightest urgency, thus maintaining a steady investment strategy.

Conclusion

The term "best" for a tax-saving fund is subjective and depends on individual investment goals and risk tolerance. While ELSS funds can offer higher returns over a longer period, the PPF remains a secure and reliable option for those who prioritize guaranteed returns and long-term stability.

Please feel free to reach out for a detailed discussion on which fund best suits your individual needs.

Best regards,

Shruti Agrawal