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Q: 23-year-old Raunak Rajpal writes us from Mumbai. I am facing a big dilemma whether to go for a Public Provident Fund (PPF) account or an ELSS (Equity Linked Savings Schemes) fund or both. The only thing stopping me from investing in ELSS is the 10 percent LTCG (Long-Term Capital Gains) tax. Requesting for help in this matter. Also, please suggest the best ELSS funds for an investment horizon of 15 years.
A: PPF and ELSS are absolutely non-comparable products. One is a debt product and the other one is equity. If your portfolio and your goals require a debt product, then PPF is the answer and if it requires equity, then ELSS is the answer. Why let tax rules dominate your decision? Ask yourself, why would you invest in ELSS? If the answer is equity, it has the potential to generate double figure returns, then even after 10 percent LTCG, the net returns would be better than tax free returns of PPF. Don’t let tax rules dominate your investment decision.
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First Published: IST