What is ELSS?
ELSS (Equity Linked Savings Scheme) is a type of equity mutual fund that invests at least 80% of its money in shares. Investment in ELSS up to ₹1.5 lakh per year is eligible for deduction under Section 80C of the Income Tax Act (old tax regime).
ELSS has the shortest lock-in among all 80C options, just 3 years, compared to 5 years for tax saving FD and 15 years for PPF. Because it invests in equity, it also has the potential to give higher returns.
ELSS vs other tax saving options
| Option | Lock-in | Expected return | Tax on return |
|---|---|---|---|
| ELSS | 3 years | 10% to 14% (market linked) | LTCG 12.5% above ₹1.25 lakh |
| PPF | 15 years | 7.1% | Tax free |
| Tax saving FD | 5 years | 6% to 7.5% | Taxable as per slab |
| NSC | 5 years | 7.7% | Taxable as per slab |
| NPS | Till 60 years | 9% to 12% (market linked) | Partly taxable |
How to use the ELSS calculator
- Choose SIP for monthly investment or Lumpsum for one-time investment.
- Enter the amount. To use the full 80C limit, ₹12,500 per month or ₹1,50,000 per year is enough.
- Enter the expected return and the number of years (minimum 3).
- Check the estimated returns and total value.
Points to remember
- Each SIP installment in ELSS has its own 3 year lock-in.
- ELSS deduction is available only in the old tax regime.
- Gains above ₹1.25 lakh in a year are taxed at 12.5% as long term capital gains.
- Stay invested for 5 to 7 years or more for better results, even after the lock-in ends.
Frequently asked questions
What is the lock-in period of ELSS?
ELSS has a lock-in of 3 years from the date of each investment. For SIP, every installment is locked for 3 years from its own date.
How much tax can I save with ELSS?
You can claim up to ₹1.5 lakh under Section 80C. In the 30% tax bracket this saves about ₹46,800 including cess. This benefit is only in the old tax regime.
Can I invest more than ₹1.5 lakh in ELSS?
Yes, there is no upper limit on investment. But the tax deduction is limited to ₹1.5 lakh per year.
Is ELSS better than PPF?
ELSS has a shorter lock-in and higher return potential but carries market risk. PPF gives guaranteed tax free returns. Many investors keep both.
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View allDisclaimer: This calculator is for information purposes only. Results are estimates based on the inputs you provide and do not guarantee any returns. Please consult a qualified financial advisor before making investment or tax decisions.