Tax Savings

NSC Vs ELSS: Which One is Better For Tax-Saving Investments?


For a secure future, it is very important to plan your finances as soon as you start earning. It helps you choose the right investments based on your wealth creation goals. Under Section 80, numerous tax-planning funds help you save on taxes, but each comes with its risks and rewards. In this article, we will discuss how NSC and ELSS funds differ. This will serve as a full guide to help you evaluate NSC vs the best ELSS funds to find out which one helps you save the most tax.

What exactly is a National Savings Certificate (NSC)? 

NSC means “National Savings Certificate.” It is a way to save money at the post office, and the government backs the investments and their returns. The government started this programme to help people get into the habit of saving money and reach their long-term financial goals. 

The government sets the interest rate on this plan, but it can be changed every three months. The current rate of interest on NSC is 6.8%. You can invest as little as Rs. 100 in this; there is no upper limit. Also, the money invested in NSC cannot be taken out for five years. When the term is up, investors cannot stay invested; they have to get a new certificate at the prevailing interest rates.

As per Section 80C of the Income Tax Act, 1961, an investor who invests in NSC can get a tax deduction of up to Rs. 1.5 lakh. Also, the NSC calculator can estimate the return on an NSC investment. The NSC calculator is free to use. 

What exactly is an Equity Linked Savings Scheme (ELSS)? 

Equity-Linked Savings Scheme is a type of mutual fund that can be invested in stocks and stock-related instruments in various industries and markets. The money made from this plan is directly tied to the share market. 

In recent years, the best ELSS funds have become very attractive to investors because, compared to other tax-saving methods, they have the potential to bring in higher returns. This is a good investment for people who want to save money for the long term. 

Most ELSS funds have a three-year lock-in period for investments. Also, investors can have tax breaks of at least Rs. 1.5 lakh every financial year under Section 80C of the Income Tax Act, 1961.

Features of NSC

Investment Term & Lock-in Period

NSCs have a five-year maturity and lock-in period. Early withdrawals are allowed for only certain situations. 

Tax Benefits 

Under Section 80C of the Income Tax Act of 1961, an investor who invests in NSC can get a tax deduction of up to Rs 1.5 lakh per year. 


Since the Indian government supports NSC, it carries very few or almost no risks.

Features of The Best ELSS Funds

Long-term investments 

The lock-in period for most ELSS funds is three years. This means that you must stay in the plan for a minimum of three years before leaving it. After three years, you can choose to exit the scheme or stay in it. To ensure good returns, it’s best to keep your money in the best ELSS funds.

Tax Benefits 

As per section 80C of the Tax Act of 1961, if you invest in the best ELSS funds, you can get a tax deduction of Rs1.5 Lakhs per year. Also, there is no upper limit to the amount you can invest in a year. 

Long-Term Capital Gains (LTCG) Tax is applied to the returns because the best ELSS fund investments are generally held for longer than a year. This applies to returns taxed at 10% and exceeding Rs 1 lakh in a fiscal year.


Due to investments in the equity markets, the best ELSS funds typically have medium to high risk levels (depending on the investment option). Due to their exposure to the equity market, ELSS investments run the risk of Net Asset Value (NAV) instability or volatility. Therefore, you must invest in ELSS funds only if your risk appetite is high.

Contrast Between ELSS and NSC

There are numerous differences between NSC and ELSS. Here are a few: 


Equity-Linked Savings Schemes are mutual fund plans that invest in equity funds to give investors returns and tax exemptions under Section 80C.

National Savings Certificates (NSCs) are small savings plans given by the post office that offers guaranteed and risk-free investment returns. 

Lock-in Period

The lock-in period for ELSS is three years, making it a short-duration tax-saving investment; in fact, one of the shortest. The lock-in period for an NSC is five years. 


By investing in ELSS, you can get tax benefits for Rs. 1.5 lakhs per year. For investments held for more than a year, returns over Rs. 1 lakh are levied at 10% as Long Term Capital Gains (LTCG) Tax. 

With NSC, you can also get a tax benefit of Rs. 1.5 Lakh per year through Section 80C. But the interest income on investments is taxed based on your tax bracket. 

Risks associated 

Due to their investments in the stock market, ELSS funds have medium to high risks. NSC is a government-supported program. and is pretty much risk-free, suitable for risk-averse investors. 


Long-term investments in ELSS funds yield returns of between 12 to15%. On the other hand, NSC offers an interest rate of 6.8% compounded annually.


Both of these investments are great ways to save on taxes. The way these investments compare in terms of risk and return is very different, catering to different types of investors.

Those willing to take on more risk should consider the best ELSS funds to save on taxes because they can provide higher returns. On the other hand, if you don’t like taking risks, you can opt to invest in the NSC for stable and assured returns.

For more information, you can visit the Piramal Finance website and explore their products and services.