ELSS Calculator
Project an ELSS tax-saver SIP — market-linked growth over the 3-year lock-in and beyond, plus the 80C tax it saves in year one.
Year-wise growth
| Year | Invested | Value at year end |
|---|---|---|
| 1 | ₹1,50,000 | ₹1,60,117 |
| 2 | ₹3,00,000 | ₹3,40,540 |
| 3 | ₹4,50,000 | ₹5,43,846 |
| 4 | ₹6,00,000 | ₹7,72,935 |
| 5 | ₹7,50,000 | ₹10,31,080 |
What is an ELSS (Equity Linked Savings Scheme)?
An Equity Linked Savings Scheme (ELSS) is a specialized category of diversified equity mutual funds defined by the Securities and Exchange Board of India (SEBI) that qualifies for tax deduction under Section 80C of the Income Tax Act up to ₹1,50,000 per financial year. In exchange for the tax deduction, investments in ELSS are subject to a mandatory 3-year lock-in period—the shortest lock-in among all Section 80C tax-saving instruments.
Unlike fixed-income tax-savers such as Public Provident Fund (PPF) or 5-Year Bank Fixed Deposits, ELSS schemes invest at least 80% of their total assets in equity and equity-related securities across large-cap, mid-cap, and small-cap companies, providing long-term wealth creation potential that outpaces retail inflation.
Dual Advantage: Wealth Creation plus Old Regime Tax Relief
An ELSS delivers dual financial benefits in a single financial product:
- Substantial Tax Savings: Under the Old Tax Regime, investing ₹1,50,000 in an ELSS saves up to ₹46,800 in tax annually for individuals in the 30% tax slab (including 4% cess).
- Superior Long-Term Compounding: While PPF offers a government-fixed rate of 7.1% and bank FDs yield around 6.5% to 7.0%, Indian equity mutual funds have historically delivered 12% to 15% annualized returns over 5-to-10-year horizons.
The ELSS SIP Future Value & Tax Saving Formulation
FV = P × [ ( (1 + i)ⁿ − 1 ) ÷ i ] × (1 + i)
- FV — Projected maturity corpus of your ELSS SIP
- P — Monthly SIP contribution (₹12,500/month exactly maximizes the ₹1.5 lakh 80C limit)
- i — Monthly compounding rate (expected annual return ÷ 1200)
- n — Total number of monthly instalments (minimum 36 months / 3 years)
- Tax Saved in Year 1: Full Old Regime slab recomputation on first 12 instalments (up to ₹1,50,000)
Worked example: ₹12,500 Monthly SIP over 5 Years
Consider an investor earning ₹15,00,000 annual salary who commits ₹12,500 per month into a top-performing ELSS fund with an assumed return of 12% per annum over a 5-year horizon (60 months):
- Total capital invested over 5 years: 60 × ₹12,500 = ₹7,50,000
- Estimated capital gains: ₹2,81,080
- Projected portfolio value at Year 5: ₹10,31,080
- First-year tax saved (Old Regime, 30% slab): ₹46,800
- Total tax saved across 5 years: ₹46,800 × 5 = ₹2,34,000
By investing ₹7.5 lakh over 5 years, the investor saved ₹2.34 lakh in income tax while building an equity wealth corpus of ₹10.31 lakh.
ELSS SIP Growth Schedule (₹12,500/month at 12% p.a.)
| Horizon | Total Invested | Estimated Returns | Projected Corpus | Lock-in Status |
|---|---|---|---|---|
| 3 Years (36 mo) | ₹4,50,000 | ₹93,846 | ₹5,43,846 | Initial 12 instalments unlocked |
| 5 Years (60 mo) | ₹7,50,000 | ₹2,81,080 | ₹10,31,080 | First 24 instalments unlocked |
| 7 Years (84 mo) | ₹10,50,000 | ₹5,99,737 | ₹16,49,737 | First 48 instalments unlocked |
| 10 Years (120 mo) | ₹15,00,000 | ₹14,04,238 | ₹29,04,238 | First 84 instalments unlocked |
How the 3-Year Rolling Lock-In Works for SIPs
A vital operational nuance of ELSS SIPs is the rolling lock-in rule. Each monthly instalment is subject to its own independent 3-year lock-in from the exact date units were allotted:
- Instalment paid in April 2024 unlocks in April 2027.
- Instalment paid in May 2024 unlocks in May 2027.
- Instalment paid in March 2025 unlocks in March 2028.
Consequently, at the end of Year 3 (month 36), only the units purchased during the very first month become redeemable. The entire 3-year SIP corpus is not unlocked at once; it unlocks month by month in sequence.
Taxation of ELSS Redemptions (Budget 2024 Updates)
Because all ELSS units must be held for a minimum of 3 years, every redemption automatically qualifies as Long-Term Capital Gains (LTCG) under Section 112A of the Income Tax Act:
- LTCG Exemption Limit: Net long-term capital gains from equity funds up to ₹1,25,000 per financial year are completely exempt from tax.
- Tax Rate: Gains exceeding ₹1,25,000 are taxed at a flat concessional rate of 12.5% plus 4% Health & Education Cess (revised from 10% in Budget 2024).
- Strategic Redemption: Taxpayers can stagger ELSS redemptions across multiple financial years to utilize the annual ₹1.25 lakh LTCG exemption repeatedly.
Frequently Asked Questions on ELSS Funds
Crucial details on lock-in periods, capital gains taxation, risk profile, and comparison with PPF and FDs.
Each individual SIP instalment carries its own 36-month lock-in starting from its specific unit allotment date. For example, units purchased on January 10, 2025 unlock on January 10, 2028; units bought on February 10, 2025 unlock on February 10, 2028. You cannot redeem or switch units before their specific 3-year maturity.
Because all units are held beyond 12 months, profits are treated as Long-Term Capital Gains (LTCG). Under Section 112A as updated in Budget 2024, gains up to ₹1,25,000 in a financial year are exempt from tax, and gains exceeding ₹1.25 lakh are taxed at 12.5% plus cess.
No. ELSS mutual funds invest in the stock market and carry equity market risk. Returns depend on underlying corporate earnings and stock price movements. While historical 10-year returns have averaged 12%–15%, returns in any individual year can be positive or negative.
No. The 3-year lock-in is merely a mandatory minimum holding period. You can choose to leave your money invested for 5, 10, or 15+ years to let compounding continue undisturbed. Wealth managers recommend holding equity investments for at least 5 to 7 years.
ELSS offers the highest long-term growth potential and the shortest lock-in (3 years), but carries market risk. PPF offers guaranteed, completely tax-free returns (7.1%) backed by the Government of India, but locks for 15 years. 5-Year Bank FDs offer fixed interest, but returns are fully taxable at your slab rate. A balanced portfolio often combines ELSS for growth and PPF for stability.
No. Section 80C deductions are unavailable under the New Tax Regime. If you file your taxes under the New Regime, an ELSS functions like any regular diversified flexi-cap mutual fund with a 3-year lock-in; the growth compounding still occurs, but the upfront tax deduction cannot be claimed.
Yes. You can stop or pause your monthly SIP auto-debit anytime without penalty. However, all instalments already debited will remain locked for their respective 3-year terms. Stopping mid-year will reduce the total Section 80C deduction you can claim for that financial year.
No. There is no legal ceiling on how much you can invest in an ELSS scheme. However, the tax deduction under Section 80C is strictly capped at ₹1,50,000 per financial year. Any investment beyond ₹1.5 lakh compounds as regular equity without additional tax deduction.
No. Statutory tax guidelines prohibit pledging, hypothecating, or taking a loan against ELSS units while they remain within the 3-year mandatory lock-in period.
The Growth option is strongly recommended. Under Growth, capital remains fully invested and compounds tax-free until redemption. Under IDCW, dividends are credited to your bank account and taxed every year at your regular income tax slab rate, reducing long-term compounding efficiency.