Both ELSS and tax saving fixed deposits are great investments for section 80C deduction of income tax act. However, there are some basic differences one should be understood before taking an investing decision.
|
Factors |
ELSS |
Tax Saving FD |
|
Investment |
ELSS is an equity mutual funds which invests primarily in shares or shares related investments |
It’s special fixed deposit made with any bank for at least 5 years. |
|
Returns |
The returns in ELSS is not fixed and is completely dependent on equitymarket’s performance. |
The returns obtained are fixed and known to an investor at the time of deposit. Each bank has their own interest rate. Generally it varies from 6.5%-7.5%. |
|
Risk |
There is no guarantee of principal safety in ELSS. However, equity investments generally give positive returns on the long-term. As per our research, BSE SENSEX has delivered an annual return of 12.78% in past 10 years. |
Tax saving FDs are as safe as Normal fixed deposit of banks. |
|
Liquidity |
Amount Invested in ELSS can be withdrawn any time. |
Tax saving FDs can’t be withdrawn within 5 years of investment |
|
Tenure |
The tenure ranges from three years till any time period as per choice of investor |
The minimum tenure is 5 years while the maximum tenure is 10 years. |
|
Lock in period |
There is a lock-in period of 3 years in ELSS |
There is a lock in period of 5 years involved. |
|
Online |
ELSS can be done Online. An investor can invest or sell ELSS fund any time |
Some private banks have started offering Tax saving FDs online, but a majority of banks don’t have online facilities. |
Further, we advise you to consult your financial advisor or check your risk profile before making an investing decision.