LIC vs PPF vs ELSS. Features and differences
Investing is no longer associated with wealth. To protect one’s future it has become essential. In this blog, let’s compare Life Insurance Corporation of India (LIC) vs Public Provident Funds (PPF) vs Equity Linked Savings (ELSS) funds to see which is a better option for you.
What are LIC plans?
The insurance and investment firm Life Insurance Corporation of India is owned by the government. It provides individualized policies to meet each person’s insurance needs.
One of the first life insurance companies and a pioneer in the insurance industry is LIC. Life insurance shields a family from unforeseen events like death.
It helps to secure the financial future of a family. In the event that the family’s primary provider dies suddenly, life insurance’s primary objective is to provide “death benefits” to the dependents.
Features of LIC plans
- Policy Holder: The life insurance policy’s premiums are paid by the insured. They also agree to the terms of the company’s life insurance policy.
- Premium: It’s the sum that the policyholder pays to the insurance provider to have their life covered.
- Maturity: It is the period of time following the conclusion of the policy term and the termination of the life insurance contract.
What is PPF?
A portion of one’s annual income is set aside in the Public Provident Fund, also known as PPF, which is a popularly abbreviated savings vehicle.
If the money was received on maturity, PPF investors may receive tax-free interest income on their capital. PPF is a government-backed saving method for risk-averse people.
Features of PPF
- Tenure: A Public Provident Fund account has a 15-year term. The lock-in period is, therefore, 15 years as well.
- Eligibility: PPF investments are open to all Indian nationals. Additionally, a PPF account can be opened in a minor’s name, and the parent or legal guardian can manage it.
- Risk: The PPF program is supported by the Indian government. As a result, it is one of the most secure investment strategies available to private investors.
What are ELSS funds?
The only type of mutual fund that qualifies for tax deductions under the terms of Section 80C of the Income Tax Act of 1961 is an ELSS fund, also known as an equity-linked savings plan.
You can save up to INR 46,800 in taxes each year and get a tax credit of up to INR 1.5 lakhs by investing in ELSS mutual funds.
The majority of the portfolio of ELSS mutual funds is allocated to equities and equity-linked instruments, such as listed shares, making up 65% of the portfolio.
They could also be somewhat exposed to fixed-income securities. The shortest lock-in period among all Section 80C investments is three years for these funds.
- Lowest Lock–in: In the tax-saving category, ELSS investments have a 3-year lock-in period, making them a relatively more liquid option.
- SIP Option: The Systematic Investment Plan allows you to start investing in ELSS with as little as INR 500 each month (SIP). When it’s convenient, you can start and stop the SIP.
- High Returns: One of the best returns in the group of tax-saving products has been provided by ELSS.
PPF vs ELSS
Following is the difference between PPF vs ELSS:
|Safety||Very High (Govt Guaranteed)||Low-Moderate (Invests in Equity)|
|Returns||Moderate – Fixed by Govt every quarter.||High – Equity compounds over the long term.|
|Lock-in||15 years||3 years|
|Tax on Returns||Exempt||10% of capital gains over the long term. Gains up to 1 lakh are exempted.|
|Tax on Maturity||Exempt||As indicated above, taxes only apply to gains.|
PPF vs LIC
Following is the difference between PPF vs LIC:
|Basis of Difference||PPF||LIC Policy|
|Purpose||Savings and investment||Insurance and risk protection|
|Returns||7.1% p.a., compounded annually||Depending on the policy, usually 4%-6%|
|Tenure||15 years||Flexible tenure, as chosen by the subscriber|
|Premature closure||Not allowed||Allowed with penalties|
|Regulatory authority||Central Government||Insurance Regulatory and Development Authority|
|Deposit amount||The minimum is INR 500 and the maximum is INR 1.5 lakhs||Fixed Premiums|
|Liquidity||PPF enables loans from the third year and permits partial withdrawals from the seventh year.||A 3-year lock-in term applies to insurance plans before they may be redeemed.|
|Taxation||PPP belongs to the EEE group. As a result, the corpus of the investment, interest, and redemption is entirely tax-free.||If the premium is less than 10% of the amount assured, it is tax-free. Additionally tax-free is the death benefit.|
LIC vs PPF vs ELSS: Which is better?
People frequently mix up investments with insurance. Investments are for a secure future, whereas insurance options like LIC are for risk protection.
Having sound financial standing is important for any investor. A person needs an emergency fund for unforeseen costs, insurance to protect against unfortunate events, and investments to ensure a secure financial future.
While both PPF and ELSS programs save taxes, it’s still important to choose one based on your investment time horizon, risk tolerance, and expected returns.
PPF is best for those who can afford a 15-year lock-in period and are utterly risk-averse. While ELSS is a good option for investors who are willing to take a moderate risk in exchange for higher returns.
The best way to keep ELSS risk to a minimum is to keep your investments for the long run.
Each person has a unique style of thinking and attitude while creating investment strategies. Some people desire higher earnings, while others seek financial security.
Examining your financial condition is essential before making any form of investment, including those in PPF, LIC, or ELSS plans.
Consult an expert advisor to get the right plan
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