ELSS, NPS, and PPF Under the New Tax Regime: Are They Still Worth It?

Tue, 1 Apr 2025

4 mins

Personal Finance

With the introduction of the new tax regime, many investors find themselves questioning the relevance of traditional tax-saving investments. The new system offers lower tax rates but removes several popular deductions, including Section 80C benefits.

However, investments like Equity-Linked Savings Schemes (ELSS), the National Pension System (NPS), and the Public Provident Fund (PPF) continue to provide strong financial advantages beyond tax benefits. Let’s explore why they still deserve a place in your portfolio.

• ELSS: A Gateway to Long-Term Growth

  ELSS has long been favored for its dual advantage of tax savings and equity-linked growth. While the new tax regime does not provide deductions for ELSS investments, it remains an attractive option due to:
   

  • Market-Linked Returns: ELSS invests in equities, offering better long-term returns, with many funds averaging over 13% annually in the past decade.
  • Short Lock-In Period: ELSS comes with just a three-year lock-in, making it more liquid compared to other tax-saving options.
  • Long-Term Wealth Creation: Encourages long-term equity participation, making it a great tool for wealth generation.

  Even without tax breaks, ELSS remains a powerful choice for investors aiming for capital appreciation.

• NPS: A Secure Path to Retirement with Limited Withdrawals

  The National Pension System (NPS) is designed to ensure financial security post-retirement. While its tax benefits are now restricted under the new tax regime, NPS still stands strong due to:
   

  • Balanced Growth & Stability: A mix of equities and fixed-income instruments ensures both capital appreciation and security.
  • Strict Withdrawal Conditions: NPS funds remain largely locked until retirement, with limited partial withdrawals allowed under specific conditions, ensuring disciplined saving.
  • Annuity Benefits: A portion of the corpus must be used to purchase an annuity, providing a steady post-retirement income stream.

  For those seeking a structured retirement plan, NPS remains a solid choice despite reduced tax incentives.

• PPF: Stability and Guaranteed Returns for Long-Term Savings

  Public Provident Fund (PPF) continues to be a preferred investment, offering security and reliable returns even without tax deductions:
   

  • Guaranteed, Risk-Free Returns: PPF provides a government-backed interest rate (currently 7.1% per annum), making it a dependable option.
  • Tax-Free Earnings: Unlike many fixed-income investments, the interest earned on PPF is tax-free where aggregate contribution made by a person in PPF is upto two lakhs and fifty thousand rupees in a year.
  • Long-Term Security: With a 15-year tenure, PPF is ideal for those who prefer low-risk, fixed-income savings.

  For conservative investors or those looking to diversify, PPF remains a compelling investment avenue.

• Final Thoughts

  Although the new tax regime has shifted the focus away from traditional tax-saving strategies, ELSS, NPS, and PPF continue to offer substantial financial benefits.
  
  ELSS provides market-linked growth, NPS ensures disciplined retirement savings with limited access, and PPF guarantees stable, tax-free returns. Instead of solely focusing on tax benefits, investors should consider these options based on their financial goals and risk appetite.