When it comes to saving taxes and building wealth in India, three popular instruments stand out in 2025: ELSS (Equity Linked Saving Scheme), PPF (Public Provident Fund), and ULIPs (Unit Linked Insurance Plans). Each offers tax benefits under Section 80C, but they serve different purposes.
ELSS: Tax-saving mutual funds
- Returns: Market-linked (10–14% potential).
- Lock-in: 3 years (shortest among 80C options).
- Liquidity: Moderate.
- Pros: High growth potential, low lock-in, suitable for wealth creation.
- Cons: Risk linked to market performance.
Best for: Young professionals and those with higher risk appetite looking to grow wealth while saving taxes.
PPF: Government-backed savings scheme
- Returns: 7–8% (compounded annually, tax-free).
- Lock-in: 15 years.
- Liquidity: Very low (partial withdrawals after 7 years).
- Pros: Tax-free returns, extremely safe.
- Cons: Long lock-in, fixed returns may not beat inflation.
Best for: Conservative investors or those saving for long-term goals like retirement.
ULIP: Insurance + investment combo
- Returns: Varies based on fund allocation (5–12%).
- Lock-in: 5 years minimum.
- Liquidity: Limited during initial years.
- Pros: Life cover + investment in one product.
- Cons: High charges, less transparent, returns often lower than ELSS.
Best for: Investors seeking life insurance with tax-saving and medium- to long-term investing goals.
Verdict:
- Choose ELSS for growth.
- Choose PPF for guaranteed returns and retirement planning.
- Choose ULIP only if you require insurance plus long-term investing in a single product.