Difference Between NPS, ELSS and FD

Financial goals are the groundwork for saving and investing activities, most individuals begin investing to save money on taxes. However, there are many who wish to live a financially healthy lifestyle but are unsure where to begin. Financial goals should be specific, realistic and action-oriented given to the multiple investment options available in today’s time.

Investment always involves the expenditure of individual funds - time, effort, money, or an asset—with the expectation of receiving a higher return in the future than what was initially invested. Therefore, any step taken in the hopes of increasing future revenue might be considered an investment in general. For example, the purpose of pursuing higher education is to enhance an individual’s knowledge and upskill their abilities. To find out more on financial investment schemes or alternatives, read on.

Key Differences Between NPS, ELSS and FD

Following are some key differences in financial investment schemes like, NPS, ELSS and FD -

1. National Pension Scheme (NPS)

National Pension Scheme (NPS) is a government-sponsored scheme which in turn, makes it a safer option for individuals to invest in. The scheme was launched in January 2009 and was first made available to the government employees. However, eventually the scheme opened to all in 2009. This scheme allows the insured individuals to make recurring contributions to a pension account throughout their working lives. Insured Individuals have the option to take a portion of their funds in a lump sum and use the remainder to purchase an annuity to ensure a steady income once they retire.

According to experts, even working professionals from the unorganized sector can also take advantage of this scheme to receive a pension when they retire. This scheme also provides the benefit of saving taxes under Section 80C even after the ceiling of Rs 1.5 lakh has been reached in this pension arrangement. Investment in NPS, also ensures an extra Rs 50,000 deduction to the respective individual. Furthermore, regardless of the amount of money invested in the NPS, the individual is guaranteed a minimum pension.

2. Equity Linked Saving Scheme (ELSS)

Equity Linked Savings Scheme (ELSS) is an open-ended equity mutual fund scheme and also one of the most productive tax-saving options wherein you can start investing from as low as Rs 500. This scheme comes with a mandatory lock-in period of 3 years from the date of investment. This scheme allows individuals to put up to 65 percent of their money in the stock market. The rate of interest paid on ELSS investments is directly proportional to market performance. Furthermore, investments in this scheme qualify for a tax credit under section 80C and are classified under the EEE category. Experts recommend this scheme for individuals looking to invest for a longer length of time, ranging from 5 to 7 years.

3. Senior Citizens Savings Scheme (SCSS)

Senior People Savings Scheme (SCSS) is specifically designed for India's senior citizens. This scheme provides a steady source of income to insured individuals while also providing the maximum level of safety and tax savings. It is an excellent investment option for any individual or retiree over the age of 60.

This scheme has a government-backed retirement initiative. Senior citizens in India can invest a lump sum, either individually or collectively, in the plan and get a regular source of income as well as tax benefits.

Endnotes

It is important for an individual to keep a check on essentials of risk profile, financial objectives, returns, and so on when assessing options that are best for saving taxes under Section 80 C. It's crucial to pick a strategy based on projected profits, risk tolerance, and time horizon. Tax planning is a crucial part of personal finance, and it's crucial to pick a strategy that fits an individual’s needs.

Also read - Factors To Consider While Buying Life Insurance Policy

Disclaimer: This article is issued in the general public interest and meant for general information purposes only. Readers are advised not to rely on the contents of the article as conclusive in nature and should research further or consult an expert in this regard.