Educational Purpose Only: Tax savings are estimated at 30% slab assuming maximum benefit. Actual tax savings depend on your tax bracket.
ELSS has a mandatory 3-year lock-in period.
What is ELSS?
Equity Linked Savings Scheme (ELSS) is a category of mutual fund that invests primarily in equities and qualifies for a tax deduction of up to ₹1,50,000 per year under Section 80C of the Income Tax Act. It has the shortest lock-in period among all 80C instruments — just 3 years — making it popular among investors who want both wealth creation and tax savings.
Because ELSS is equity-oriented, it carries market risk. However, historically, equity mutual funds have delivered 12–15% CAGR over long periods, significantly outperforming PPF, NSC, and fixed deposits — all of which also qualify for 80C but offer lower, fixed returns.
How is the tax saving calculated?
The tax benefit is based on your annual investment capped at ₹1,50,000. If you are in the 30% tax bracket, you save 30% of ₹1,50,000 = ₹45,000 per year. This calculator uses the 30% slab as a benchmark. Your actual saving depends on which tax slab you fall in — 5%, 10%, 15%, 20%, or 30%. Note: ELSS tax benefits apply only under the Old Tax Regime; under the New Tax Regime, Section 80C deductions are not available.
Frequently Asked Questions
What is the lock-in period for ELSS?
ELSS has a mandatory lock-in period of 3 years — the shortest among all Section 80C tax-saving instruments. Each SIP instalment is locked in for 3 years from its investment date, so if you invest monthly via SIP, each instalment unlocks 3 years after it was invested, not all at once.
How much tax can I save with ELSS?
ELSS investments qualify for deduction under Section 80C up to ₹1,50,000 per year. The actual tax savings depend on your income tax slab. At 30% slab, you save ₹46,800 (including 4% cess) annually. At 20% slab, you save ₹31,200. Note that the tax benefit applies only under the Old Tax Regime.
Is ELSS better than PPF for tax saving?
ELSS and PPF serve different investor profiles. ELSS is market-linked with higher return potential (historically 12–15% CAGR) but with market risk and a 3-year lock-in. PPF offers guaranteed, tax-free returns (currently 7.1%) with a 15-year lock-in. For long-term wealth creation with tax savings, ELSS often outperforms, but PPF is safer.
Are ELSS returns taxed?
Gains from ELSS after the 3-year lock-in are taxed as Long-Term Capital Gains (LTCG). Gains up to ₹1 lakh per financial year are exempt from tax. Gains above ₹1 lakh are taxed at 10% without indexation benefit.
Related Calculators
This calculator is for educational and illustrative purposes only. Mutual fund investments are subject to market risks. Tax rules are subject to change. Consult a qualified tax or financial advisor before making investment decisions.