PPF vs ELSS vs NPS: Where does ₹5,000/month grow the most? 15-year returns compared

PPF, ELSS and NPS are among the most widely used tax-saving investment options available to individuals. While all three offer tax benefits, they differ in terms of structure, eligibility, lock-in periods and long-term return potential.

Each of these instruments also follows distinct rules for contributions, withdrawals and taxation. Understanding these differences is essential when comparing how they function and how you can use them to meet your investment goals. Here’s how each scheme works if you invest ₹5,000 regularly in PPF, ELSS and NPS over a period of 15 years, highlighting differences in returns, lock-in and overall structure.

Public Provident Fund

Public Provident Fund (PPF) is a long-term savings scheme backed by the government and best suited for conservative or risk-averse investors. It comes with a 15-year lock-in period, which can be extended in blocks of five years, with no limit on the number of extensions.

Investors can make deposits in instalments (up to 12 times in a financial year) or as a lump sum, with a maximum annual investment limit of ₹1.5 lakh. PPF follows the exempt-exempt-exempt (EEE) tax regime, where contributions qualify for deduction under Section 80C, interest earned is tax-free, and maturity proceeds are also fully exempt.

The current interest rate is around 7.1% per annum, compounded annually and reviewed quarterly by the government. It has remained unchanged since 1 April 2020. At this rate, a monthly investment of ₹5,000 over 15 years would grow to an estimated ₹16.2 lakh, with a total investment of ₹9 lakh, assuming the rate remains unchanged.

Equity Linked Savings Scheme

Equity-linked savings schemes (ELSS) are mutual funds that invest primarily in equities. They come with a 3-year lock-in period and offer tax deductions under Section 80C up to ₹1.5 lakh. Given their equity exposure, they are suited to investors with a higher risk appetite and long-term wealth-creation goals.

After the lock-in period, ELSS funds function like regular equity mutual funds, allowing investors to hold, redeem or switch units without restrictions. Returns are market-linked and have historically averaged around 10–14% annually over long periods, according to Value Research.

Under current tax rules, long-term capital gains (LTCG) exceeding ₹1.25 lakh per year are taxed at 12.5%. Assuming an average return of 12% per annum, a monthly investment of ₹5,000 over 15 years would amount to ₹9 lakh and could grow to an estimated corpus of around ₹25.2 lakh.

National Pension Scheme

National Pension Scheme (NPS) is a market-linked retirement savings instrument regulated by PFRDA. Contributions are eligible for tax deductions under Section 80C up to ₹1.5 lakh, along with an additional ₹50,000 deduction under Section 80CCD(1B).

Funds are generally locked in until the age of 60, with limited provisions for partial withdrawals. It is widely used for retirement planning due to its tax benefits and long-term compounding potential.

Under current rules, up to 80% of the corpus can be withdrawn as a lump sum at maturity, subject to applicable conditions. Returns are market-linked and typically range between 9% and 12% annually.

Assuming an average return of 10%, a monthly investment of ₹5,000 over 15 years would total ₹9 lakh and could grow to an estimated corpus of around ₹20–21 lakh.

Disclaimer: This article is for informational purposes only and not financial or tax advice. Interest rates and tax benefits are subject to change. Consult a financial advisor or tax professional before making any investment decisions.