Is PPF Really a Good Investment, Compared to Volatile ELSS, Find Out!!!

Today, most of the individual still believes that PPF is one of the best TAX saving instrument and religiously put their money, the moment the new financial years starts and never ever worried about the interest rate or withdrawing money immediately. They mentally lock themselves for the next 15 years for the following reasons...

1. Currently 8.7% is tax free after 15 years! It will not be the same in the 15 years.

2. Some money should be in a safe investment irrespective of the longggggg tenure!

3. If they are in 30% tax bracket, the rate of return will be over 12%, without understanding what the future needs will be!!!

Somehow, my mind will never ever accept any fixed instrument for more than 5 years. I keep telling my friends and my investor that does not put money in a PPF, but hardly anyone listen to my advice.

If something can be put it in illustration at least some people will understand how PPF is not a suitable product after 15 years. This is one such initiative to put the numbers in place.

I will explain you two scenarios

Scenario 1

One of the investor invested Rs. 8,000 per month which amounts to Rs. 96,000 per annum in PPF and I assume 11.58% (to match the same amount in both illustration I derived this percentage for PPF) interest and the total investment is Rs. 13,68,000 and the final value is Rs. 34,87,612 and instead of 180 months I have taken 171 months because of the ELSS fund, I have compared is only 171 months old.

Suppose the same money is invested in ELSS fund the value would become Rs. 67,87,516 for the same investment which produces 18.66% CAGR.

Both the money is tax free and the difference only 33 Lakhs!

Scenario 2

In the 2 scenario one individual is invested only for the first 3 years and from 37th month onwards he is withdrawing 8K and put it back to earn tax exemption. Taking 8K and putting back 8k in other words further contribution is stopped and the first 3 years contribution is allowed to grow. Hope I made it clear.

Here, the investor got tax exemption for all the 171 months whereas his investment was only Rs 2,88,000 and the return would be the same Rs. 34,87,452.

Whereas in the PPF the investment is Rs. 13,68,000 and the same return of Rs. 34,87,612.

For Rs. 96,000 the tax exemption will be Rs. 19,200. For 15 Years it would be 15*19,200=2,88,000. In other words, you will get 100% tax exemption of your investment along with great returns!

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