Equity‑Linked Savings Schemes (ELSS) are mutual funds that invest primarily in equities and offer tax benefits under Section 80C. Fixed deposits are low‑risk instruments with guaranteed returns. ELSS returns are market‑linked and can be higher but are not guaranteed, whereas FD returns are fixed. ELSS has a mandatory three‑year lock‑in period but offers potential for capital appreciation. FD lock‑in for tax‑saving FDs is five years. Investors should choose based on risk tolerance, investment horizon and tax planning needs.
ELSS vs. FD
| Attribute | ELSS | Fixed Deposit |
|---|---|---|
| Risk | Market‑linked (high) | Low |
| Returns | Variable; historically 10 %–15 % over long term | Fixed (~5 %–8 %) |
| Lock‑in | 3 years | 5 years (tax‑saving FD) |
| Tax treatment | Gains taxed as LTCG after 3 years; dividends taxable | Interest taxed as per slab; principal eligible for 80C in tax‑saving FD |
Diversify across FDs and ELSS to balance risk and return. Consult a financial adviser for personalised guidance.
