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Lumpsum Calculator
Calculate One-Time Investment Returns
Investment Details
Lumpsum investment means investing a large amount at once, ideal for long-term wealth creation with compounding benefits.
Lumpsum Formula:
FV = PV × (1 + r)^n
Where FV = Future Value, PV = Present Value,
r = Rate of Return, n = Number of Years
Investment Results
Investment Breakdown
Calculation:
FV = 1,00,000 × (1 + 0.12)^10
FV = 1,00,000 × 3.1058
FV = ₹0
Wealth Gain = ₹0 - ₹1,00,000
Wealth Gain = ₹0
Lumpsum Investment Benefits
- Power of compounding on the entire amount
- Ideal for long-term wealth creation (10+ years)
- No need to time the market perfectly
- Lower transaction costs compared to regular investments
- Best suited for investors with high risk tolerance
- Perfect for windfalls like bonuses or inheritance
Lumpsum Investment Calculator India: Calculate Returns on One-Time Investments
A lumpsum investment refers to investing a large amount of money all at once, rather than spreading it over time through methods like SIP. This investment strategy is particularly suitable when you have a significant amount available—from bonuses, maturity proceeds, inheritance, property sale, or accumulated savings. While lumpsum investing can potentially generate higher returns when timed correctly (investing during market corrections), it also requires careful consideration of market conditions and risk tolerance. Understanding how your lumpsum investment grows over time is crucial for effective financial planning.
Our Lumpsum Calculator helps you estimate the future value of your one-time investment based on expected annual returns and investment duration. By entering your investment amount, expected return rate, and time period, you can visualize how compounding works on your entire capital from day one. This tool is essential for planning major financial goals like retirement corpus building, children's higher education fund, or wealth accumulation. The calculator uses the compound interest formula FV = PV × (1 + r)^n to project your returns, showing you the total maturity value, wealth gain, and percentage returns on your investment.
Understanding Lumpsum Investment Components
Investment Amount
This is the total one-time amount you invest at the beginning. Unlike SIP where you invest monthly, lumpsum means your entire capital starts working immediately, benefiting from compounding from day one. In India, lumpsum investments typically range from ₹50,000 to several crores depending on your financial capacity. Common sources include annual bonuses (₹2-5 lakhs), maturity proceeds from insurance or fixed deposits, inheritance or gift money, property sale proceeds, or accumulated savings. The larger the lumpsum amount and longer the investment horizon, the more dramatic the compounding effect. For example, investing ₹10 lakhs at 12% for 20 years grows to approximately ₹96.46 lakhs!
Expected Annual Return Rate
This represents the average yearly return you anticipate from your lumpsum investment. Different asset classes offer varying return potentials: Equity mutual funds (large-cap) historically deliver 11-13% over long periods, mid/small-cap equity funds offer 13-16% with higher volatility, balanced/hybrid funds typically give 9-12%, debt funds provide 6-9% with lower risk, and PPF/government schemes offer 7-8% with complete safety. Your expected return should align with your investment choice and risk appetite. Conservative investors might use 10-11% for diversified equity funds, while aggressive investors may project 12-15% for high-growth funds. Remember, these are projections—actual returns will vary based on market performance, fund management, and economic conditions.
Investment Period
This is the total duration you plan to keep your money invested without withdrawing it. Lumpsum investments truly shine over longer periods due to exponential compounding. For short-term goals (1-3 years), consider debt funds or fixed deposits for stability. For medium-term goals (3-7 years), hybrid funds balance growth and safety. For long-term goals (7+ years), equity-oriented investments maximize wealth creation. The difference is stark: ₹5 lakhs invested at 12% grows to ₹8.81 lakhs in 5 years, ₹15.52 lakhs in 10 years, ₹48.23 lakhs in 20 years, and an astounding ₹1.50 crores in 30 years! Time is the most powerful factor in compounding—even a few extra years significantly multiplies your wealth.
Compounding Frequency
Compounding refers to how often your returns are reinvested to generate additional returns. In mutual funds, NAV (Net Asset Value) is calculated daily, meaning your returns compound daily. For fixed deposits, banks typically compound quarterly or annually. The more frequent the compounding, the higher your effective returns. For example, ₹1 lakh at 12% annual compounding grows to ₹3.11 lakhs in 10 years, but with quarterly compounding, it grows to ₹3.26 lakhs—an extra ₹15,000! This is why mutual funds (daily compounding) often outperform FDs (quarterly/annual compounding) even at similar nominal rates. Our calculator uses annual compounding for conservative estimates, but actual mutual fund returns benefit from daily compounding.
Taxation on Returns
Understanding taxation is crucial for calculating actual post-tax returns on lumpsum investments. For equity mutual funds held over 1 year (long-term), gains above ₹1 lakh per year are taxed at 10% without indexation benefit. Short-term gains (under 1 year) are taxed at 15%. For debt mutual funds, long-term gains (over 3 years) are taxed at 20% with indexation, while short-term gains are taxed at your income tax slab. Fixed deposits are fully taxable at your slab rate with TDS if interest exceeds ₹40,000. PPF and ELSS (after 3-year lock-in) offer tax-free returns. For example, on a ₹10 lakh equity investment growing to ₹30 lakhs in 10 years, only gains above ₹1 lakh are taxed—effective tax is minimal, making equity investments highly tax-efficient for long-term lumpsum investors.
Lumpsum vs SIP Strategy
Lumpsum and SIP are complementary strategies, not competitors. Lumpsum works best when you have a large amount available and markets are reasonably valued or in correction (Nifty PE below 22-23). It benefits from immediate full market exposure—if markets rise, your entire capital appreciates. However, it carries timing risk—investing at market peaks can lead to negative returns for 1-2 years. SIP, conversely, averages out market volatility through rupee cost averaging but takes time to deploy capital fully. Smart strategy: Use lumpsum for 50-60% allocation in diversified funds or index funds, and deploy remaining 40-50% through SIPs over 6-12 months. This balances immediate market participation with gradual exposure. During clear market bottoms (like March 2020), lumpsum outperforms. In bull markets, gradual SIP reduces regret risk.
How to Use This Lumpsum Calculator
- Enter Investment Amount: Input the total lumpsum amount you plan to invest (₹10,000 to ₹1 crore range). This could be from bonus, maturity proceeds, inheritance, or accumulated savings. Be realistic—only invest money you won't need in the near term.
- Set Expected Return Rate: Choose a realistic annual return rate based on your investment type. Use 11-12% for diversified equity funds, 8-10% for balanced funds, 7-8% for debt funds or PPF. Check historical returns of your chosen fund category but be conservative in projections.
- Select Investment Period: Choose how long you'll keep the money invested without withdrawing. Align this with your financial goal timeline—minimum 5 years for equity exposure, 7-10 years for children's education, 15-20 years for retirement corpus building.
- Review Results: The calculator shows future value, wealth gain, total return percentage, and CAGR. The visual breakdown helps you understand how much is your principal versus returns. Use this information to decide if projected returns meet your financial goals.
- Compare Scenarios: Experiment with different amounts, return rates, and time periods. See how a few extra years or slightly higher returns dramatically impact wealth creation. This helps in making informed investment decisions and goal planning.
Practical Example: Lumpsum Investment Scenarios
Scenario: Investing ₹10 Lakh Bonus in Mutual Funds
💡 Key Insight
Your ₹10 lakh lumpsum investment grows to over ₹54.7 lakhs in just 15 years—that's more than 5X multiplication! The remarkable aspect: ₹44.7 lakhs (82%) of the final amount comes from compounded returns, not your initial capital. This demonstrates the true power of lumpsum investing—your entire capital works from day one, generating returns that themselves generate more returns exponentially over time.
Comparison across different time periods at 12% return:
• 5 years: ₹10L → ₹17.6L (76% gain)
• 10 years: ₹10L → ₹31.1L (211% gain)
• 15 years: ₹10L → ₹54.7L (447% gain)
• 20 years: ₹10L → ₹96.5L (865% gain)
• 25 years: ₹10L → ₹1.7 Crores (1,600% gain!)
Notice how returns accelerate dramatically in later years—this is exponential compounding at work. The last 5 years alone contribute almost as much wealth as the first 15 years combined!
Why Lumpsum Investment Planning Matters
Strategic lumpsum investment planning is crucial for maximizing wealth creation from windfalls and large savings. Here's why understanding and planning your lumpsum investments is essential:
- Immediate Full Market Exposure: Unlike SIP where capital is deployed gradually, lumpsum investments put your entire money to work immediately. This means every rupee starts compounding from day one. If markets perform well over your investment period, your complete capital benefits from the growth. For example, during the 2020-2024 market rally, investors who made lumpsum investments in March 2020 saw 100-150% returns, significantly outperforming SIPs started at the same time.
- Power of Exponential Compounding: Lumpsum investments showcase compounding at its finest because returns are calculated on the growing principal continuously. A ₹20 lakh investment at 12% grows to ₹62 lakhs in 10 years, ₹1.09 crores in 15 years, and ₹1.93 crores in 20 years. The acceleration is dramatic—wealth grows faster in later years than initial years. This makes lumpsum ideal for long-term goals where time horizon exceeds 10 years.
- Lower Transaction and Management Costs: A single lumpsum transaction typically incurs minimal or zero transaction charges in direct mutual funds. Compare this to SIP where you make 12 transactions annually over 10-15 years. While most direct funds don't charge transaction fees, regular funds through distributors have ongoing commission costs (1-1.5% annually) that compound negatively over time. Lumpsum also requires less monitoring—you invest once and let it grow, unlike SIPs which need annual step-up reviews.
- Optimal Use of Windfalls: Annual bonuses (₹2-10 lakhs), gratuity payments, maturity from endowment policies (₹5-20 lakhs), inheritance or property sale proceeds (₹20 lakhs-1 crore), or business profits are all ideal for lumpsum investing. These are one-time receipts that won't recur regularly, making lumpsum deployment the natural choice. Smart investors immediately allocate these windfalls to long-term investments rather than letting them sit idle in savings accounts earning 3-4% or, worse, getting spent on lifestyle inflation.
- Tax Planning Through Strategic Timing: Lumpsum investments allow strategic tax planning. Investing ₹1.5 lakhs in ELSS in a single shot gives you immediate Section 80C deduction for that financial year. For non-tax-saving investments, you can strategically time lumpsum deployment just after a financial year if you've already exhausted your ₹1 lakh LTCG exemption limit, giving you fresh exemption quota for the new year. This is harder to optimize with monthly SIPs.
- Market Timing Opportunities: While timing the market is generally discouraged, significant market corrections (15-20% drops in Nifty) present rare opportunities where lumpsum investments can generate exceptional returns. March 2020 (COVID crash), 2013 (taper tantrum), 2011-12 (European crisis) were such opportunities. Investors who deployed lumpsum during these periods saw 25-30% CAGR over next 3-5 years. Having lumpsum capital ready and courage to deploy during panic creates wealth. However, this requires discipline—most investors panic and withdraw during corrections rather than invest!
Frequently Asked Questions
Lumpsum investment means investing a large amount of money all at once in a single transaction, as opposed to Systematic Investment Plan (SIP) where you invest fixed amounts regularly (monthly/quarterly). In lumpsum, your entire capital is deployed immediately and starts generating returns from day one.
Key Differences:
Lumpsum: One-time large investment, requires significant capital upfront, full market exposure immediately, benefits when markets are low or rising, higher short-term volatility risk, ideal for windfalls (bonus, inheritance), no rupee cost averaging.
SIP: Regular small investments, can start with ₹500-1,000 monthly, gradual market exposure, rupee cost averaging reduces timing risk, more stable journey, ideal for salaried income, builds discipline.
Which is better? Neither is universally better—it depends on your situation. If you have ₹5-10 lakhs available from bonus or maturity, lumpsum is appropriate. If you're building wealth from monthly salary, SIP is ideal. Many smart investors use both: deploy existing savings as lumpsum and start SIP for future savings. During market corrections (15-20% falls), lumpsum tends to outperform SIPs started at the same time due to immediate exposure at lower prices.
Lumpsum returns are calculated using the compound interest formula, which accounts for the exponential growth of your investment over time:
FV = PV × (1 + r)^n
Where:
FV = Future Value (maturity amount)
PV = Present Value (initial lumpsum investment)
r = Annual rate of return (in decimal, e.g., 12% = 0.12)
n = Number of years
Practical Example:
If you invest ₹5,00,000 lumpsum at 12% expected return for 10 years:
PV = 5,00,000
r = 12/100 = 0.12
n = 10 years
FV = 5,00,000 × (1 + 0.12)^10
FV = 5,00,000 × (1.12)^10
FV = 5,00,000 × 3.1058
FV = ₹15,52,924
Your wealth gain = ₹15,52,924 - ₹5,00,000 = ₹10,52,924 (211% return)
This formula shows how compounding multiplies your money—the returns themselves generate additional returns, creating exponential growth. The longer you stay invested, the more dramatic this effect becomes.
Lumpsum investment carries timing risk—if you invest at market peaks, you may face negative returns or stagnation for 1-2 years before recovery. However, this risk diminishes significantly with longer investment horizons. Historical data shows that equity lumpsum investments held for 7+ years have rarely given negative returns, regardless of entry timing.
Risk Levels by Time Horizon:
• 1-2 years: High risk—market volatility can cause 10-20% fluctuations. Not recommended for equity lumpsum.
• 3-5 years: Moderate risk—you should see positive returns unless you enter during peak bull markets.
• 7-10 years: Low risk—historical data shows 90%+ probability of positive returns with 11-13% CAGR.
• 15+ years: Very low risk—time averages out all market cycles, delivering consistent 11-15% returns.
Risk Mitigation Strategies:
1. Invest for long term: Minimum 7 years for equity lumpsum
2. Avoid peak valuations: Check Nifty PE ratio—avoid if above 25-26, favorable below 20-22
3. Diversify across funds: Split lumpsum across 2-3 funds (large-cap, flexi-cap, index)
4. Hybrid approach: Invest 50-60% lumpsum immediately, deploy remaining 40% via STP (Systematic Transfer Plan) over 6-12 months
5. Asset allocation: For very large amounts (₹50L+), mix equity lumpsum with debt for balanced risk
In India, most mutual funds allow lumpsum investments starting from ₹5,000, though some funds accept as low as ₹1,000. However, practically speaking, lumpsum investing makes more sense when you have a substantial amount available—typically ₹50,000 or more. Below this threshold, SIP might be more appropriate unless it's a one-time windfall.
Practical Lumpsum Investment Ranges:
• ₹50,000-2 lakhs: Starter lumpsum, ideal for first-time bonus or small inheritance
• ₹2-5 lakhs: Standard lumpsum range, common annual bonuses for mid-level professionals
• ₹5-10 lakhs: Significant lumpsum, from senior-level bonuses or accumulated savings
• ₹10-25 lakhs: Large lumpsum, from gratuity, business profits, or property sale partial proceeds
• ₹25 lakhs+: Very large lumpsum, requires careful asset allocation and diversification across multiple funds and asset classes
Special Considerations for ELSS: ELSS (tax-saving) funds have the same minimums (₹500-5,000), but investing ₹1.5 lakhs lumpsum at the start of financial year maximizes your money's growth potential versus investing in March at year-end. This gives your capital 12 extra months of compounding, which can add ₹15,000-20,000 extra over the 3-year lock-in period.
No Upper Limit: There's no maximum limit for lumpsum investments in mutual funds. However, for very large amounts (₹1 crore+), consider spreading across multiple fund houses and strategies to manage concentration risk. Also, some schemes may restrict very large single investments (₹1 crore+) to prevent market impact—check with the fund house for such high-value investments.
The "best" time for lumpsum investment is when you have the money available and a long investment horizon (7+ years), regardless of market conditions. However, certain market situations do offer better entry points that can enhance returns:
Favorable Times for Lumpsum Investment:
• Market Corrections (10-15% fall from peak): These present excellent buying opportunities. Historical corrections in 2020 (COVID), 2018, 2015-16, 2013 all led to strong subsequent returns.
• Moderate Market Valuations: When Nifty PE ratio is between 18-22 (compared to long-term average of 20-21), suggesting markets are fairly valued, not expensive.
• Start of Recovery Phase: After prolonged bear markets when sentiment is negative but economic indicators show improvement.
• Personal Windfalls: Whenever you receive bonus, inheritance, or other lump sums—immediate deployment prevents lifestyle inflation and ensures money works for you.
Times to Be Cautious:
• When Nifty PE is above 25-26, suggesting expensive valuations
• During euphoric bull markets with excessive media hype and retail participation
• When you might need the money in next 3-5 years (use debt funds instead)
Practical Strategy: If you're unsure about timing, use a Systematic Transfer Plan (STP). Park your lumpsum in a liquid/ultra-short-term debt fund and set up automatic monthly transfers to your target equity fund over 6-12 months. This gives you partial rupee cost averaging while keeping your money invested (earning 6-7% in debt) rather than sitting idle in savings account. Best of both worlds!
Withdrawal rules and lock-in periods for lumpsum investments depend on the type of mutual fund you've invested in:
Open-Ended Mutual Funds (Most Common):
• No mandatory lock-in: You can redeem anytime after investment
• Exit Load: Most equity funds charge 1% if redeemed within 1 year (365 days). After 1 year, no exit load.
• Redemption Process: Online redemption processed in 1-3 working days, money credited to bank
• Taxation: Short-term gains (under 1 year) taxed at 15%, long-term gains (over 1 year) taxed at 10% above ₹1 lakh annual exemption
ELSS (Tax-Saving Funds):
• Mandatory 3-year lock-in: Cannot redeem before 3 years from investment date
• After 3 years: Complete freedom to redeem partially or fully, no exit load
• Tax benefit: ₹1.5 lakh investment qualifies for Section 80C deduction
• Returns tax-free: LTCG (after 3 years) follows standard equity taxation—10% above ₹1 lakh
Close-Ended and Interval Funds:
These have fixed maturity periods (3-5 years) and don't allow redemption before maturity, except during specific window periods. Not common for retail investors.
Best Practice: Even though open-ended funds allow withdrawal anytime, treat your lumpsum investment as long-term (minimum 5-7 years for equity). Frequent redemptions during market volatility lead to losses. Historical data shows staying invested through market cycles delivers optimal returns—investors who remain invested for 10+ years rarely face negative returns regardless of entry timing.
Taxation on lumpsum mutual fund investments depends on the fund type (equity vs debt) and holding period. Understanding this is crucial for calculating actual post-tax returns:
Equity Mutual Funds (>65% equity exposure):
• Short-Term Capital Gains (STCG): If you sell within 1 year, gains taxed at flat 15%, regardless of your income slab
• Long-Term Capital Gains (LTCG): If held over 1 year, gains taxed at 10% only on amounts exceeding ₹1 lakh per financial year. First ₹1 lakh of long-term gains completely tax-free!
• Example: ₹10L investment grows to ₹30L in 5 years (₹20L gain). In year of redemption, ₹1L is tax-free, remaining ₹19L taxed at 10% = ₹1.9L tax. Net gain = ₹18.1L. Effective tax rate = just 9.5% on total gains!
Debt Mutual Funds:
• Short-Term: Under 3 years, gains taxed at your income tax slab rate (can be 30% for high earners)
• Long-Term: Over 3 years, gains taxed at 20% with indexation benefit. Indexation adjusts your purchase price for inflation, significantly reducing taxable gains.
• Example: ₹10L debt fund investment sold after 4 years for ₹13.5L (₹3.5L gain). With indexation, purchase price adjusted to ₹11.2L, so taxable gain = only ₹2.3L. Tax = 20% × ₹2.3L = ₹46,000 (effective rate ~13% instead of 20%)
ELSS (Equity Linked Savings Scheme):
• Investment up to ₹1.5L qualifies for Section 80C deduction, reducing taxable income
• After 3-year lock-in, redemption follows equity fund LTCG rules (10% above ₹1 lakh)
• Double benefit: Tax saving on investment + tax-efficient returns = most tax-efficient investment option
Tax-Saving Strategy: For large lumpsum (₹20L+), split across financial years to maximize ₹1 lakh LTCG exemption annually. For example, redeem ₹5-6L per year instead of ₹20L at once—saves ₹30,000-40,000 in taxes! Also, time redemptions post-March if you've exhausted current year's ₹1L exemption limit.
Choosing the right mutual fund for your lumpsum investment requires evaluating multiple factors aligned with your financial goals, risk appetite, and investment horizon:
Step 1: Define Your Time Horizon
• 1-3 years: Short-term debt funds, ultra-short duration funds, or liquid funds (6-8% returns, low risk)
• 3-5 years: Balanced/Hybrid funds, dynamic asset allocation funds (9-11% returns, moderate risk)
• 5-7 years: Large-cap equity funds, index funds (11-13% returns, moderate-high risk)
• 7-10 years: Flexi-cap, multi-cap, large & mid-cap funds (12-14% returns, high risk)
• 10+ years: Mid-cap, small-cap, aggressive hybrid funds (13-16% returns, very high risk)
Step 2: Assess Your Risk Tolerance
• Conservative: Focus on large-cap equity funds, balanced funds, or debt-oriented hybrid funds—lower volatility, stable 9-12% returns
• Moderate: Flexi-cap, multi-cap funds that balance growth with stability—12-14% potential
• Aggressive: Mid-cap, small-cap funds for maximum growth—15-18% potential but 20-30% drawdowns possible
Step 3: Evaluate Fund Performance
• Check 5-year and 10-year returns (not just 1-year)—consistency matters more than top performance
• Compare returns with benchmark and category average
• Check performance during market crashes (2020, 2018, 2015-16)—did the fund protect capital well?
• Expense ratio should be under 1% for large-cap, 1.5% for mid/small-cap (lower is better)
Recommended Lumpsum Investment Strategy:
For ₹5-10 lakh lumpsum, don't put everything in one fund. Diversify:
• 40% in Nifty 50 Index Fund (stable, low-cost core holding)
• 30% in Flexi-cap/Multi-cap Fund (actively managed, flexibility to shift across market caps)
• 30% in Large & Mid-cap Fund (balanced exposure to growth and stability)
This combination delivers 12-14% returns with lower volatility than aggressive small-cap focused approach.
Systematic Transfer Plan (STP) is a facility that allows you to transfer a fixed amount periodically (usually monthly) from one mutual fund scheme to another within the same fund house. It's an excellent strategy to deploy lumpsum investments gradually while keeping your money invested and earning returns.
How STP Works:
1. Park your entire lumpsum in a liquid fund or ultra-short-term debt fund (earns 6-7% annually)
2. Set up automatic monthly transfers (say ₹50,000/month) to your target equity fund
3. Over 6-12 months, your complete lumpsum gets deployed to equity gradually
4. You benefit from rupee cost averaging in equity + 6-7% returns on debt portion waiting to be transferred
5. Better than keeping money idle in savings account (3-4%) while doing SIP
When to Use STP:
• Market at High Valuations: When Nifty PE is above 24-25, suggesting expensive markets, STP reduces timing risk
• First-Time Lumpsum Investor: If you're nervous about deploying ₹5-10 lakhs at once, STP provides psychological comfort
• Uncertain Market Conditions: During periods of high volatility or geopolitical uncertainty
• Large Amounts: For ₹20 lakh+ investments, gradual deployment through STP reduces regret risk
STP vs Direct Lumpsum Performance:
Historical data shows:
• In rising markets: Direct lumpsum outperforms STP by 2-4% annually because full capital participates in rally from day one
• In falling/volatile markets: STP outperforms by 3-5% as gradual deployment captures lower prices
• Over full market cycles (5-7 years): Difference is minimal (0.5-1%), as both strategies average out
Verdict: STP is not about higher returns but about risk management and peace of mind!
Optimal STP Strategy: Don't stretch STP beyond 12 months. Studies show 6-month STP provides best balance—captures some rupee cost averaging benefit without missing out on too much market upside. Very long STPs (18-24 months) often underperform direct lumpsum because you're essentially doing a long SIP, defeating the lumpsum advantage.
Yes, lumpsum investment in ELSS (Equity Linked Savings Scheme) is one of the smartest tax-saving strategies. Unlike PPF or NSC where returns are modest (7-7.5%), ELSS offers potential for 12-15% returns while providing Section 80C tax deduction, making it a superior wealth-building tax-saving option.
Tax Benefits of ELSS Lumpsum:
• Investment up to ₹1.5 lakh per financial year qualifies for Section 80C deduction
• This deduction reduces your taxable income, saving 20-30% tax based on your slab
• For someone in 30% tax bracket, ₹1.5L investment saves ₹46,800 tax (₹45,000 IT + ₹1,800 cess)
• For 20% bracket, saves ₹31,200 tax
• For 5% bracket, saves ₹7,800 tax
Lumpsum vs SIP in ELSS for Tax Saving:
You can invest in ELSS through either lumpsum or monthly SIP—both qualify for 80C. However, lumpsum has a strategic advantage:
• If you invest ₹1.5 lakh lumpsum in April (start of FY), your money gets full 12 months of growth before year ends
• If you do ₹12,500 SIP throughout the year, March installment gets only 1 month of growth
• Over the 3-year lock-in, this early start can add ₹15,000-25,000 extra corpus due to longer compounding
• Practical approach: If you get annual bonus in April-June, deploy entire ₹1.5L then; otherwise, do SIP
Complete Tax-Saving Example:
Mr. Sharma (35 years old, 30% tax bracket) invests ₹1.5 lakh lumpsum in ELSS in April 2024:
• Immediate tax saving: ₹46,800 (in FY 2024-25)
• ELSS grows at 13% over 3 years (conservative equity returns)
• Maturity in April 2027: ₹2,15,950
• Long-term capital gain: ₹65,950, first ₹1 lakh exempt, so zero tax!
• Net actual investment after tax savings: ₹1.5L - ₹46,800 = ₹1,03,200
• Effective return: (₹2.16L - ₹1.03L)/₹1.03L = 109% over 3 years, or 28% CAGR!
No other tax-saving instrument comes close to this wealth creation potential.
Important Note: ELSS has 3-year mandatory lock-in per installment. For lumpsum invested in April 2024, you cannot withdraw before April 2027. Plan accordingly—only invest money you won't need for 3+ years.