POSTED BY Ashwinikumar Chinni ON April 12, 2012 12:57 pm COMMENTS (2)

I 45 yr. old. My retirement in year of 2014.
I am working in private form I PF cutting 1500.00 per month.
I have ECS 3000.00 In NPS From Aug-2011
I have ECS 1000.00 in IDFC Tax Saver ElSS.
Please advice me can I open PPF account or ElSS.
I need money after 5 yr.

2 replies on this article “PPF or ELSS”

  1. Dear Ashwini, a plain & simple product like Bank RD for 5Y duration may be good idea for you if you are in 10% Tax slab. From the MF world as you require money in 5Y time frame, either invest in a balanced fund like HDFC Prudence or a Hybrid fund like HDFC MIL Long Term Plan.

    If you open PPF account now, you can’t redeem in full before 15Y that’s why I’m not asking to open a PPF account.

    I’m not considering tax saving on these investments. If your aim is to save some tax also, you may increase your PF contribution also & may avail full amount in year 2014 fully tax free.



  2. If you need money after 5 years then PPF is not a good choice. You can look for regular Mutual funds so you wont have any lock in and since the goal is 5 years away it makes sense to withdraw some money after 2-3 years and moving them to Debt instruments that can be redeemed at the end of 5 year period.

    If tax saving is also needed ELSS is the way to go. HDFC Tax saver is a better option but the flipside is this – if you contribute on start of year 1 you can withdraw the amount from ELSS at start of 4th year. Beginning Year 2 contributions will be available by start of year 5. But if the markets tank by the time you reach the goal you will be in trouble. Hence the reason to pull out some money from end of year 3 to safeguard any profits. In ELSS you cannot do such things which is why I recommend regular euity MFs.

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