ELSS (Equity Linked Savings Scheme) returns are calculated using standard mutual fund return formulas. The scheme has a 3-year lock-in period and offers tax deduction under Section 80C up to ₹1.5 lakh annually.

How the calculation works

M = P × ((1 + r)^n - 1) / r × (1 + r) [SIP mode]
M = P × (1 + r)^n [Lumpsum mode]

Where:
P = Monthly/Annual Investment Amount
r = Monthly Rate of Return
n = Number of Periods

A quick example

Let us calculate ELSS returns with tax benefits:

Monthly SIP:₹12,500

Expected Return:13% p.a.

Investment Period:10 years

Tax Slab:30%

Step by step

1.Monthly investment of ₹12,500 for 10 years = ₹15,00,000 total invested
2.At 13% p.a., maturity ≈ ₹29,50,000
3.LTCG tax: 10% on gains above ₹1,00,000 exemption
4.Annual tax saving under 80C: ₹1,50,000 × 30% = ₹45,000
5.Total tax saved over 10 years: ₹4,50,000

So the answer is: Net Maturity ≈ ₹28,70,000 | Total Tax Saved: ₹4,50,000 | Effective Returns: Higher than most 80C options

Frequently Asked Questions

What is ELSS?

ELSS (Equity Linked Savings Scheme) is a diversified equity mutual fund that offers tax deduction under Section 80C of the Income Tax Act, with the shortest lock-in period of 3 years among all 80C options.

How is ELSS taxed?

ELSS gains are treated as Long-Term Capital Gains (LTCG). Gains up to ₹1 lakh in a financial year are tax-free. Gains above ₹1 lakh are taxed at 10% without indexation benefit.

What is the lock-in period for ELSS?

ELSS has a lock-in period of 3 years — the shortest among all Section 80C tax-saving instruments. After 3 years, you can redeem partially or fully.

ELSS vs PPF: Which is better?

ELSS offers higher potential returns (12-15%) but with market risk and 3-year lock-in. PPF offers safer returns (7-8%) but has a 15-year lock-in. Choose based on your risk appetite.