ELSS vs National pension Scheme (NPS)

NPS is more of a retirement solution than an investment solution. It invests partially in equities but the lock in period is till the retirement age of 60. This may be restrictive for young investors who are aiming for higher returns in a relatively medium period time. If you are looking to generate returns within the timeframe of three to five years then NPS is not the scheme to invest. The long term capital gains on ELSS are tax free. The same is not applicable for NPS. 40% of the maturity amount has to be used to buy annuities and remaining amount is taxable according to the income tax slab. While, NPS enjoys an additional 50,000 INR benefit under Section 80CCD, the tax treatment at maturity, moderate or low exposure to equities makes it slightly disadvantageous to ELSS.