Friday 24 May 2024
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Difference between ELSS and FD

Difference between ELSS and FD

If you are looking for a tax saving investment scheme then you might have received suggestions on both FD and ELSS. A comparative analysis of both will help you choose the better option for your maximum benefit.

What is ELSS?

Equity-linked savings scheme or ELSS fund is a great option to make the most out of your investment. They generally garner high return and have a lock-in period of only 3 years. However, they come with the same risk as any other mutual fund.

What is FD?

A fixed deposit or FD is the safest investment choice. But they do not offer high returns. You also have to lock in the money for about 5 years in order to avail tax benefit.

ELSS vs FD – Both ELSS and FD are tax saving investment options as mentioned in the article 80C. However, they will not get you the same amount of return. To understand better how each is different from the other, refer to the chart below.

Features ELSS FD
Citizenship Indian citizen Indian citizen
Definition ELSS investment is carried out in the equity market. You can invest a lumpsum or through SIP. A certain amount is fixed for a certain amount of time. FDs are of two types. It can be regular or tax saving investment plan.
Nature of return Depends on how the fund performs. So your rate of return can greatly vary. Guaranteed
Tenure 3 years Tax saver FD is for 5 years and regular FD can vary depend n scheme.
Risk Moderate to high Negligible
Online option Available Available
Loan No loans are given against ELSS Regular FD can get you loans but if you have a tax saving FD you will not be eligible for loan against it.
Credit card option Credit cards are not issued for your ELSS investment You can get credit card against regular FD but for tax-saving FD you can not avail credit card.
Withdrawal before completion of tenure Before the end of the maturity period ELSS cannot be liquidated Regular FD can be liquidated at any time. However tax saver FD cannot be liquidated before the term period.
Account holder Single or joint account Single or joint account
Tax saving LTCG payable ( exemption of up to 1 lakh per year) TDS as applicable

Ideally, an investor should have a diverse investment portfolio which includes both FD and ELSS. Well -spread out funds increases chances of gaining the highest profit. The real task for the investor is to decide what amount to invest in which portfolio. To decide on the investment amount, assessing risk factor is crucial.

Fixed deposit is for investors who have pre-decided targets to fulfil with investment money. ELSS is perfect for an investor who is attempting to save tax and aiming to build a fortune over the years.

To invest in FD, you will have to contact your bank. You can also use your net banking facility to do an FD.

You can invest in ELSS online through a reliable brokerage like Kotak Securities. Get a Demat account. Select the right options under the mutual fund’s section. For any assistance call the brokerage.