ELSS vs NSC Comparison
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In this article, we will compare the investment options under section 80C - ELSS vs NSC. Both the investments, ELSS (Equity Linked Saving Scheme) and NSC (National Saving Certificate) are eligible for claiming tax deduction under section 80C.
Tax Saving Mutual Funds vs Post Office National Savings Certificate
Introduction
In this article, we will compare the investment options under section 80C – ELSS vs NSC. Both the investments, ELSS (Equity Linked Saving Scheme) and NSC (National Savings Certificate) are eligible for claiming tax deduction under section 80C.
In our earlier article, we have covered the similar comparison of ELSS vs Tax Saving FDs.
ELSS vs NSC Comparison
Purpose of Investment
- ELSS : ELSS investment serves both the purposes like tax saving as well as Wealth Creation for Long Term Goals.
- NSC : Whereas NSC is a popular small saving scheme, which was introduced with a purpose to encourage people to develop a habit of regular savings.
ELSS Vs NSC

WHAT ARE ELSS & NSC?
- ELSS :
- Equity Linked Saving Schemes are the diversified equity mutual funds which are mostly Large Cap oriented funds.
- Investment in Equity Market
- NSC :
- National Savings Certificate arethe type of loan given that you give to the government at a predefined fixed interest rate.
- It is fixed income investment option. Amount is invested in Government Bonds.
Who Can Invest?
- ELSS : Resident Individuals as well as NRIs can invest in ELSS
- NSC : Only Resident Individuals can invest in NSC
Minimum & Maximum Investment Amount
- ELSS :
- Minimum Investment : Rs.500
- Maximum Investment : No Limit
- NSC :
- Minimum Investment : Rs.100
- Maximum Investment : No Limit
Lock in Period
- ELSS : 3 years
- NSC : 5 years

Rate of Return & Associated Risk
- ELSS :
- Rate of return : 11% to 14% per annum
- As the name suggests, ELSS is equity linked savings schemes, therefore, the returns are dependent on the market conditions and hence there are chances of receiving negative returns on investment.
- As the investment returns are linked with the market conditions, risk is high as compared to NSC.
- NSC :
- Rate of return : 8% per annum
- NSC is backed by Indian Government. Government declares interest rates every year, which may vary but, but there is no chance of having a loss of capital.
- Investment is made in Government Bonds, therefore risk is very low.
Taxability of Income
- ELSS : Long-Term Capital Gains (LTCG) on ELSS is taxable @ 10% without indexation benefit.
- NSC : Interest accrued on NSC is reinvested in NSC and is considered as a fresh purchase. Therefore, interest of 4 years is also eligible for tax deduction under section 80C. However, interest of 5th year is fully taxable in the hands of the investor.
Best Suitable For
- ELSS : First Time Investors who are willing to invest in equity market. Investors who wish to have a higher rate of return with lower lock-in-period
- NSC : Conservative investors who do not wish to take higher risk and wish to invest small amounts at regular intervals and want a fixed periodic interest.
Conclusion
- You will get the benefit of a tax deduction under Section 80C of the Income Tax Act in both investments, Equity Linked Savings Schemes (ELSS) and National Savings Certificate (NSC).
- If you are looking for safety and a guaranteed return, NSC scores higher in both cases. It offers a fixed return of 8% per annum. However, in terms of returns over the long term, ELSS definitely scores over NSC.
ELSS Returns are indicated as 11-15% . This should have been qualified as a probable return and not as a guaranteed rate