NPS Vs ELSS English


The main difference between NPS and ELSS is that NPS (National Pension System) is a retirement savings scheme offering a pension income, while ELSS (Equity Linked Savings Scheme) is a tax-saving investment focusing on equities for potentially higher returns.

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ELSS Meaning

ELSS stands for Equity Linked Savings Scheme, a type of mutual fund that invests primarily in the stock market. It offers tax benefits under Section 80C of the Income Tax Act in India, making it a popular choice for saving on taxes while seeking higher returns.

Equity Linked Savings Schemes (ELSS) allow investors to reduce their taxable income by investing up to INR 1.5 lakh annually, with the potential for higher returns compared to traditional tax-saving instruments. These funds have a lock-in period of 3 years, which is shorter than other tax-saving options, providing a mix of tax savings and growth opportunities through equity investments.

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What Is NPS?

The National Pension System (NPS) is a government-backed retirement savings plan in India. It aims to provide a steady income after retirement, with contributions invested in a mix of assets based on the investor’s choice.

NPS encourages individuals to invest in a pension account at regular intervals during their employment. Upon retirement, subscribers can withdraw a part of the corpus as a lump sum and use the remaining amount to purchase an annuity for a regular pension income. The scheme is flexible, offering multiple fund options and allowing for changes in investment choices as per the subscriber’s risk appetite.


The main difference between ELSS and NPS is that ELSS is designed for tax saving with a potential for high returns through equity investment, while NPS focuses on providing a retirement corpus and pension income.

ObjectiveTax saving and potential for high returns.Retirement savings and pension income.
InvestmentPrimarily in equities.Diverse options including equities and fixed income.
Lock-in Period3 years.Until retirement (minimum 60 years of age).
Tax BenefitsUp to INR 1.5 lakh under Section 80C.Additional INR 50,000 under Section 80CCD(1B), over and above 80C.
WithdrawalAfter 3 years, entire amount is withdrawable.Up to 60% at retirement; rest converted to annuity.
RiskHigher, due to equity exposure.Lower, due to diversified investment options.
Suitable ForInvestors looking for tax saving and high returns.Individuals focusing on long-term retirement planning.
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NPS Vs ELSS –  Quick Summary

  • The key difference between NPS and ELSS is that NPS is a retirement saving plan offering pension income, while ELSS is an equity-focused tax-saving investment with the potential for high returns.
  • ELSS funds invest in the stock market, providing tax benefits under Section 80C, popular for their tax-saving and high-return potential.
  • The National Pension System provides a steady post-retirement income, with flexible investment options and benefits, including a lump sum withdrawal and annuity purchase option at retirement.
  • The distinction between ELSS and NPS is that ELSS offers tax savings and growth through equities with a 3-year lock-in, whereas NPS provides a long-term retirement corpus with a focus on pension income.
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What Is The Difference Between NPS and ELSS?

The main difference between NPS and ELSS is that NPS (National Pension System) is a retirement savings scheme, while ELSS (Equity Linked Savings Scheme) is a tax-saving investment in equities.

What Is National Pension System?

The National Pension System is a government initiative in India designed to provide individuals with a way to save for retirement, offering a mix of investment options and tax benefits.

What is ELSS funds?

ELSS funds are tax-saving mutual funds that invest in the stock market. ELSS Funds offer investors the dual benefits of tax deduction under Section 80C and the potential for high returns.

Who Should Not Invest In ELSS?

Individuals who are looking for guaranteed returns or those who cannot commit to the 3-year lock-in period should avoid investing in the ELSS, as these funds involve equity market risks.

Who Is Eligible For NPS?

Any Indian citizen who are between the ages of 18 and 65 can join the NPS. This makes it a flexible option for retirement planning across a wide age range.

Is ELSS Taxable After 3 Years?

Long-term capital gains from ELSS over INR 1 lakh are taxable at 10% without the benefit of indexation. It is applicable for the investments sold after the 3-year lock-in period.

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