Driven by traditional values and ambitious life goals, millennials today are inspired to earn further and invest their savings. This tech-savvy generation has effortless and abundant access to the information to be aware of numerous investment options accessible to them, to ensure that their money works for them. Multiple studies display that unlike their former generation – their parents and grandparents, the young people prefer equity over gold, real estate or any other traditional forms of investment. One thing these investors often look in their investments is the tax-saving incentives it provides. Because let’s face it – nobody enjoys the extra outlet of money from their bank account. Some of the most popular tax-saving investment options available to Indian investors are ULIP (unit-linked insurance plans), ELSS (equity-linked savings scheme), and PPF (public provident fund).

As all these investment schemes aid to save tax while ensuring to build a retirement corpus for you, there’s always an element of confusion in choosing the suitable scheme for one’s investment portfolio. This article aims to offer a comparative analysis between ELSS funds, PPF, and ULIP.


The following table abridges the differences between tax-saving investment options – ULIP and ELSS and PPF

Basis of comparison ELSS ULIP PPF
Definition Also referred to as ELSS tax saving mutual funds, these securities invest a majority (at least 80%) of their corpus invested in  equity or equity-related securities.


It is an investment + insurance product wherein a part of the investment is allocated to investments in preferred financial products. And, the other part is used to provide a cover for securing the investor’s life. It is a savings scheme offered by the Indian government wherein the government pays a fixed, predetermined rate of interest to investors. For this reason, PPF schemes are considered to be one of the safest tax-saving investment options.
Expected returns 12 to 15% p.a. Depending on the investor’s profile 8% to 8.5% p.a.
Tax benefits Tax deduction of up to Rs 1.5 lac p.a under section 80C. Gains above Rs 1 lac are taxed at 10% without the indexation benefit. An investor can save up to Rs 46,800 by investing in ELSS tax saving The invested amount is eligible for tax deduction of up to Rs 1.5 lac under section 80C of the IT Act, 1961. However, the gains are taxable. Money deposited in a PPF account accepts tax benefits of up to Rs 1.5 lac u/s 80C. Interest gained is also tax-free.
Liquidity High-liquidity offered at all times, once the investments breach the lock-in tenure Funds under ULIP are available after the lock-in period subject to further policy conditions. Partial or low withdrawals after the expiry of 7 years from the date the account is opened
Lock-in period 3 years 5 years 15 years
Who can invest? If you are looking for dual benefits of tax saving and generating wealth If you are on the lookout for wealth creation along with a life cover Any Indian citizen who wants to achieve their long-term investment objectives and goals

As you can observe from the above table, though all these investments provide tax benefits of up to Rs1.5 lac under Section 80C of the Income Tax Act, 1961, ELSS mutual funds are a class apart. Irrespective of the investment product you decide to move forward with, ensure it is in line with your financial goals, risk appetite, and investment horizon. Happy investing!