Saturday evening. Friend on chai call. Fresh FY just started. Old questionnaire from his CA on the table.
"NPS or PPF or ELSS. Which one." Wrong question. The three are not competitors on a shelf. They are three different lock-ins with three different tax treatments and three different jobs. Pick the rate first and the wrong one will quietly win for ten years before the maturity math walks in and corrects you.
NPS
Section 80CCD 1B
Lock-in
Till 60yrs
Expected return
9.5pct blended
Tax treatment
E . E . partial T
60 pct lump tax-free.
40 pct annuity at slab.
PPF
Section 80C
Lock-in
15yrs
Expected return
7.1pct tax-free
Tax treatment
E . E . E
Contribution exempt.
Growth and maturity exempt.
ELSS
Section 80C
Lock-in
3yrs
Expected return
12.0pct gross
Tax treatment
E . E . small T
LTCG 12.5 pct on gains
above Rs 1.25 lakh per year.
Same Rs 2 lakh of tax-saving capacity. Three completely different jobs. Card two runs the 20 year math on Rs 1.5 lakh a year and shows what the lock-in column actually costs and earns.