Choosing between NSC and ELSS depends on your risk appetite and goals. NSC is a safe, government-backed certificate with guaranteed returns (around 7.7% currently) but locks your money in for 5 years. While, ELSS is a mutual fund scheme that invests in stocks and offers potentially higher returns, but, with a higher market risk. Moreover, ELSS has a shorter 3-year lock-in period.
This webpage will explore the differences between NSC and ELSS to help you choose a better investment option that suits your financial needs.
Do you need an instant loan?
Get Personal Loan Online Up to ₹15 Lakhs
By entering your number, you're agreeing to Terms & Conditions & Privacy Policy.
NSC vs ELSS – The Key Differences
The table below shows the key differences between NSC and ELSS schemes:
| Parameter | NSC | ELSS |
|---|---|---|
| Investment Type | Small savings scheme (post office) | Mutual fund scheme |
| Return Type | Guaranteed | Market-linked |
| Minimum Investment | ₹1000 | ₹500 |
| Lock-in Period | 5 years | 3 years |
| Tax Benefit | Up to ₹1.5 lakh under Section 80C (interest taxable) | Up to ₹1.5 lakh under Section 80C (LTCG tax on gains exceeding Rs. 1 lakh) |
| Risk | Low | Medium to High |
| Expected Returns | Around 7.7% compounded annually | 12-15% historically (not guaranteed) |
Understanding National Savings Certificate (NSC)
The National Savings Certificate (NSC) is a low-risk investment scheme introduced by the Indian government. It caters to individuals seeking a safe and guaranteed way to grow their money. You invest a specific amount for a fixed term of 5 years and earn a predetermined interest rate set by the government throughout the period. This interest rate is currently around 7.7%, but it can be revised periodically. So, you know exactly how much you’ll get upon maturity, making it a good option for risk-averse investors who prioritize capital protection and predictable returns.
Highlights of National Savings Certificate (NSC):
| Interest rate | 7.70% p.a. |
|---|---|
| Tenure | 5 years |
| Minimum Deposit | ₹1000 |
| Maximum Deposit | No limit |
Understanding Equity Linked Saving Scheme (ELSS)
ELSS, or Equity Linked Saving Scheme, is a mutual fund product in India that lets you invest in the stock market while saving on taxes. Unlike guaranteed returns of NSC, ELSS returns depend on stock market performance, so there’s a chance of higher gains but also potential losses. It carries more risk than NSC but comes with a shorter lock-in period of 3 years. ELSS is suitable for investors who are comfortable with some risk and looking for potentially higher returns.
Don’t know your credit score? You can find out for free!
Highlights of Equity Linked Saving Scheme (ELSS):
| Potential Returns | 15% – 18% p.a. |
| Minimum Investment | ₹500 |
| Maximum Investment | No limit |
| Lock-in Period | 3 years |
Which Option is Better, ELSS or NSC
Choosing between NSC and ELSS depends on your risk tolerance and financial goals. Here’s a breakdown to help you decide:
Choose NSC if:
- You prioritize guaranteed returns and low risk. Even if the returns are lower (around 7.7% currently), you are assured of getting your principal amount back with interest.
- Your investment horizon aligns with the lock-in period (5 years). You won’t need the money before maturity.
- You are a risk-averse investor who prefers stability over potentially higher returns.
Choose ELSS if:
- You are comfortable with some risk for potentially higher returns. Historically, ELSS funds have offered returns in the range of 12-15%, but there’s always a chance of losses due to market fluctuations.
- Your investment horizon is at least 5-7 years to ride out market ups and downs and benefit from potential growth.
- You are looking for a tax-saving investment along with the potential for capital appreciation.
Compare NSC with other investment options from below:
Ready to take the next step?
Get Personal Loan Online Up to ₹15 Lakhs
By entering your number, you're agreeing to Terms & Conditions & Privacy Policy.
Besides NSC & ELSS , you can also check and invest in other saving schemes with better returns. Check the table below with links for details: