How this instrument works
ELSS — an Equity-Linked Savings Scheme — is a diversified equity mutual fund that also qualifies as a Section 80C deduction under India's Income Tax Act, the same section covering PPF, employee provident fund contributions, life insurance premiums, and tax-saving fixed deposits. What sets it apart from every other item on that list is the lock-in: three years, the shortest mandatory holding period Section 80C allows, against fifteen years for PPF and five for a tax-saving FD or the National Savings Certificate. That shorter lock-in, paired with equity-market upside no fixed-income 80C option offers, is why a salaried taxpayer choosing where to park this year's deduction money often lands on ELSS specifically for its liquidity, not only its tax break.
This instrument runs two separate calculations, not one. Projected value at the end of the horizon treats the monthly SIP as a level deposit compounding through the future-value-of-an-annuity formula, FV = C·((1+g)^n − 1) ⁄ g, where g is the monthly rate implied by Assumed annual return, % and n is the number of months in Investment horizon, years. Tax saved via 80C deduction (year 1, capped at $150,000) is unrelated arithmetic entirely: it multiplies Investor's tax slab, % against whichever is smaller, the actual annual outlay or the statutory ₹150,000 ceiling, because Section 80C sets one combined cap across every qualifying investment a person makes in a year, not a separate cap per instrument.
Three things the formula leaves out. It applies one Investment horizon, years to the whole SIP, when in practice each monthly installment carries its own three-year lock-in measured from its own investment date — money added in month twenty-four is still locked a full year after the very first installment has cleared. It holds Assumed annual return, % flat, when ELSS holds equities and a real three-year stretch can land well above or below any single assumed number, and rarely arrives smoothly. And it prices only the year-one 80C deduction, saying nothing about the capital-gains tax due on Projected value at the end of the horizon once units are actually sold after the lock-in ends.
- Enter the level deposit into Monthly SIP investment, $ — the amount going in every month.
- Set Investment horizon, years (3-year lock-in minimum) to how long the SIP runs; ELSS itself will not release money sooner than three years from each deposit.
- Set Assumed annual return, % to the flat equity growth rate you want to test.
- Enter Investor's tax slab, % to price the Section 80C deduction at your own marginal tax rate.
- Read Projected value at the end of the horizon, Annual investment amount, and Tax saved via 80C deduction (year 1, capped at $150,000) — growth and tax saving, reported as two separate figures.
Worked example — a ₹5,000 SIP over the 3-year lock-in
Set Monthly SIP investment, $ to 5,000, Investment horizon, years (3-year lock-in minimum) to 3, and Assumed annual return, % to 12 — the minimum tenure ELSS's own lock-in allows. Projected value at the end of the horizon reads ₹215,384.39: thirty-six monthly deposits of ₹5,000 compounding at a 1% monthly rate through FV = C·((1+g)^n − 1) ⁄ g, not the simple ₹180,000 that thirty-six times five thousand would give.
Annual investment amount reads ₹60,000 (5,000 × 12), well under the ₹150,000 80C ceiling, so nothing gets clamped. At Investor's tax slab, % set to 30, Tax saved via 80C deduction (year 1, capped at $150,000) reads ₹18,000 — 30% of the full ₹60,000 — landing on that year's tax return regardless of what the ₹215,384.39 market value goes on to do afterward.
Questions
Why is ELSS's lock-in only three years when other Section 80C options run much longer?
Three years is the shortest mandatory lock-in among every Section 80C investment. PPF locks money for fifteen years, a tax-saving fixed deposit and the National Savings Certificate for five — ELSS reaches release in three purely because it holds equity, which the tax rules treat as liquid enough to free sooner than a debt-based savings instrument.
Why does the calculator label the amount fields with a $ sign when ELSS is priced in rupees?
This sheet's numeric fields follow the same $ label every calculator on this site uses, but a real ELSS SIP and the Section 80C cap it targets are priced in Indian rupees, not dollars. Treat the number you type as whichever currency you actually invest in — the arithmetic is currency-agnostic, so a ₹5,000 SIP and a $5,000 SIP run through the identical formula.
Does each SIP installment share one lock-in, or does every installment lock in on its own?
Separately. Each monthly installment carries its own three-year lock-in measured from its own investment date, not from the SIP's first deposit — money invested in month twenty-four is locked until month sixty, even though the first installment already cleared its own lock-in a year earlier. Investment horizon, years applies one horizon to the whole SIP, so this instrument approximates a running SIP rather than modeling each installment's separate release date.
Is the tax saved a one-time benefit, or does it repeat every year the SIP continues?
It repeats, but only on that year's fresh money. Tax saved via 80C deduction (year 1, capped at $150,000) prices a single year's deduction against that year's Annual investment amount; a second year of investing earns a second year's deduction on the same terms, up to the same ₹150,000 ceiling, provided the investor still has that much unused Section 80C room after PPF, EPF, or insurance premiums already claimed.
What happens to the tax saved once annual investment climbs above ₹150,000?
The saving stops growing right at the cap. Tax saved via 80C deduction (year 1, capped at $150,000) multiplies the tax slab against whichever is smaller, Annual investment amount or ₹150,000, so tripling a ₹5,000 SIP to ₹15,000 triples the yearly outlay to ₹180,000, yet the deduction still prices out at 30% of ₹150,000 — Section 80C sets one combined ceiling across every qualifying investment, not a separate one per instrument.
Does Projected value at the end of the horizon already account for tax owed when the units are sold?
No. Projected value at the end of the horizon is a raw market-value projection from the future-value-of-an-annuity formula alone; it has nothing to do with taxes. Selling ELSS units after the lock-in triggers equity long-term capital-gains tax on the profit, a separate question from the Section 80C deduction this instrument prices at the point of investment, not at the point of exit.
References
- SEC Investor.gov — Mutual funds explained
- Consumer Financial Protection Bureau — Consumer financial tools and resources
Read this first: This instrument shows arithmetic, not advice. Real offers add fees, taxes and terms that vary by lender and place — verify the figures against your actual paperwork before deciding anything.