Key Highlights
- All three qualify for Section 123 deduction (Rs 1.5 lakh limit) under Old Regime
- ELSS: 3-year lock-in — shortest; returns market-linked; LTCG at 12.5% on maturity
- PPF: 15-year lock-in; returns government-set; fully exempt (EEE status)
- NPS: Lock-in until 60; 60% lump sum exempt; 40% annuity taxable
- NPS extra: Rs 50,000 additional deduction (Section 125(1B)) — exclusive to NPS
- Only NPS employer contribution (Section 132) available in New Tax Regime
- PPF: Not available to HUFs or non-individuals
1. Full Comparison Table
| Feature | ELSS | PPF | NPS Tier-I |
|---|---|---|---|
| Full Name | Equity Linked Savings Scheme | Public Provident Fund | National Pension System |
| Section 123 deduction | Yes (up to Rs 1.5L) | Yes (up to Rs 1.5L) | Yes (up to 10%/20% of income, within Rs 1.5L) |
| Extra deduction | No | No | Yes — Rs 50,000 extra (Section 125(1B)) |
| Lock-in period | 3 years | 15 years | Until age 60 |
| Investment risk | Market risk (equity) | No risk (sovereign backed) | Market risk (depends on fund choice) |
| Current interest / returns | Market linked (~12% CAGR historically) | 7.1% p.a. (Oct-Dec 2025 rate) | Market linked (~10-12% equity CAGR) |
| Maturity tax | LTCG: 12.5% above Rs 1.25L/year | EEE: Fully exempt | 60% exempt; 40% to annuity (taxable) |
| Partial withdrawal | Yes (after 3 years per tranche) | Yes (after 7 years, partial) | 25% after 3 years (specific reasons) |
| New Regime benefit | No (Section 123) | No (Section 123) | Only Section 132 (employer) available |
| Available to HUF | Yes | No | No |
2. Who Should Choose What?
| Profile | Best Option | Reason |
|---|---|---|
| Young investor (25-35), risk appetite | ELSS + NPS | Equity returns + Rs 50K extra NPS deduction |
| Conservative investor, capital safety | PPF | Guaranteed returns, EEE status |
| Salaried, Old Regime, retirement focus | NPS + PPF | Extra Rs 50K deduction + safe corpus |
| Short-term flexibility needed | ELSS | Only 3-year lock-in among 80C options |
| HUF | ELSS | PPF and NPS not available to HUF |
3. ELSS Deep Dive
ELSS (Equity Linked Savings Scheme) invests minimum 80% in equity. Each SIP instalment has a separate 3-year lock-in (not the entire corpus together). On redemption after 3 years from each purchase date, gains are LTCG — taxed at 12.5% above Rs 1.25L/year. The combination of equity upside and Section 123 deduction makes ELSS popular for investors comfortable with market risk.
4. PPF Deep Dive
PPF (Public Provident Fund) is a 15-year government savings scheme with interest rates reviewed quarterly. The interest rate for Q3 FY 2025-26 was 7.1% p.a. PPF has the rare EEE status — contribution (Section 123), interest earned, and maturity proceeds are all exempt. Maximum annual contribution: Rs 1.5 lakh. Minimum: Rs 500. Interest is compounded annually and credited on 31 March each year.
5. NPS Deep Dive
NPS allows choice of fund manager and asset allocation (equity, government bonds, corporate bonds, alternative assets). The Rs 50,000 additional deduction under Section 125(1B) is available only with NPS Tier-I — no other instrument provides this. At maturity (age 60): 60% lump sum is tax-free; 40% must be annuitised (annuity income taxable). The employer NPS contribution under Section 132 is the only Chapter VIII deduction available in the New Tax Regime.
6. Combined Strategy Example
Illustrative only. Priya (35 years, salary Rs 15L, Old Regime):
- ELSS: Rs 50,000 → equity growth, Section 123 benefit
- PPF: Rs 50,000 → safe, EEE status, Section 123
- NPS Tier-I: Rs 50,000 (Section 123) + Rs 50,000 extra (Section 125(1B))
- Total deduction claimed: Rs 1,50,000 (Section 123) + Rs 50,000 (Section 125(1B)) = Rs 2,00,000
- Tax saved at 30% slab: Rs 62,400 + cess
7. Why TaxClue
Choosing the right mix of ELSS, PPF, and NPS for maximum tax saving and optimal return requires financial planning expertise. TaxClue helps you design a complete tax-saving investment portfolio under the Old Regime and files your ITR with all deductions claimed correctly. Contact us for personalised tax planning.