As the 2025-26 financial year comes to a close, every taxpayer in India is asking:
“Where should I invest my last ₹1.5 lakh to save tax under Section 80C?”
For decades, Fixed Deposits (FDs) were the go-to option for safety-conscious investors. But with the rise of equity markets and recent discussions in the 2026 Union Budget, ELSS (Equity Linked Savings Scheme) has emerged as a strong competitor.
In this guide, we compare both to help you decide which investment can grow your wealth faster.
What is ELSS? The High-Growth Tax-Saving Option
ELSS is a type of mutual fund that primarily invests in the stock market and is the only mutual fund that qualifies for Section 80C tax deductions.
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Lock-in Period: 3 years (the shortest among all 80C options)
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Expected Returns: Historically 12%–15% over the long term
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Risk Level: Market-linked (high risk, high reward)
💡 Tip: Use our SIP Calculator to see how monthly investments in ELSS can grow over 5–10 years compared to traditional savings.
What is a Tax-Saving FD? The Safe Haven
A tax-saving Fixed Deposit is a secure, bank-offered investment. Unlike regular FDs, it comes with a mandatory lock-in period.
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Lock-in Period: 5 years
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Expected Returns: 6.5%–7.5% (depending on the bank)
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Risk Level: Zero (guaranteed returns)
✅ Check: Use our FD Calculator to see exactly how much interest you will earn at the end of 5 years.
FD vs ELSS: 2026 Comparison Table
| Feature | ELSS Mutual Funds | Tax-Saving FD |
|---|---|---|
| Lock-in Period | 3 Years | 5 Years |
| Historical Returns | 12% – 15% | 6.5% – 7.5% |
| Tax on Returns | 12.5% LTCG above ₹1.25L | Taxed at your income slab |
| Risk Level | Moderate to High | Very Low |
| Investment Mode | SIP or Lumpsum | Lumpsum only |
Why ELSS is Winning in 2026
With medical inflation and cost of living rising nearly 14% this year, a 7% FD return effectively results in negative real growth after taxes.
ELSS allows investors to beat inflation. Even after the LTCG tax of 12.5%, the net profit from ELSS typically far exceeds the returns of an FD.
Who Should Choose Which Investment?
Choose FD If:
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You are a senior citizen or cannot afford principal fluctuations.
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You need the money exactly in 5 years for a fixed goal.
Choose ELSS If:
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You are under 50 years of age and want to build a large corpus for retirement or children’s education.
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You prefer a shorter lock-in of 3 years, giving you more liquidity than a 5-year FD.
Final Verdict: ELSS vs FD
If your goal is tax saving and wealth growth, ELSS is generally the better choice. However, a balanced portfolio often includes both FDs and ELSS, combining safety and growth.
Before investing, it’s vital to run the numbers:
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Want to see the power of compounding with ELSS? Use our SIP Calculator.
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Want to see guaranteed bank returns? Use our FD Calculator.
Investing wisely today can make a huge difference to your wealth tomorrow.