ELSS Calculator

Equity Linked Savings Scheme (ELSS) is a tax-saving mutual fund that primarily invests in equity and equity-related instruments. It offers a unique combination of wealth creation and tax benefits under Section 80C of the Income Tax Act, 1961, making it a popular choice for investors. If you want to calculate your ELSS mutual fund returns, learn about the online ELSS calculator by Share.Market below:

What is an Online ELSS Calculator?

An ELSS calculator is a digital tool designed to help investors estimate potential tax savings and returns from ELSS investments. By inputting specific details, users can make informed decisions about their tax-saving strategies.

How Does an ELSS Calculator Work?

An online ELSS calculator requires the following inputs:

• Annual Income: Determines tax bracket and applicable tax rate.
• Investment Amount: Amount planned for ELSS investment.
• Expected Rate of Return: Estimated annual return from ELSS funds.

Once these details are entered, the calculator provides an estimate of potential returns based on applicable tax laws and deductions.

Benefits of Using Share.Market ELSS Calculator

Here are the benefits of using Share.Market’s ELSS calculator:

• Quick and Easy Estimation: Provides fast calculations for potential tax savings.
• Informed Decision Making: Helps in choosing the right investment strategy.
• Goal Planning: Assists in structuring investments to maximise tax benefits.
• Scheme Comparison: Enables comparison of different ELSS funds based on potential returns.

ELSS Return Calculation Formula

ELSS returns are calculated using the future value (FV) formula. The two most common types of calculations include:

1. One-Time Lump Sum Investment Calculation

If you invest a lump sum amount, the formula used is: Future Value (FV) = Present Value × (1 + r/100)^n

Where:

• PV = Initial investment amount
• r = Annual rate of return (expressed as a decimal)
• n = Number of years the investment is held

Example:

• Investment: ₹2,00,000
• Duration: 10 years
• Estimated Return: 10% per annum

Calculation:
FV = 2,00,000 (1 + 10/100) ^ 10 FV = ₹5,18,748

2. SIP Investment Calculation

For a Systematic Investment Plan (SIP), the calculation differs. The formula is:

Monthly rate of return: r = (1 + annual rate)^(1/12) – 1
Future Value (FV) of SIP: FV = P * [(1 + r)^n – 1] / r × (1 + r)

Where:

• FV = Future value (the total amount you expect to receive at maturity)
• P = SIP amount (your regular investment)
• r = Monthly rate of return (calculated from the annual rate)
• n = Number of instalments (total number of times you invest)

Example:

• SIP Amount: ₹10,000 per month
• Duration: 10 years (120 months)
• Estimated Return: 12% per annum

Calculation:

• Monthly Rate of Return (r) = (1+12/100)^(1/12) – 1 ≈ 0.009488
• FV = (10,000 * ((1 + 0.009488)^120 -1) / 0.009488) * (1+0.009488)
• FV = ₹22,40,359

Key Considerations When Using an ELSS Calculator

• Lock-in Period: ELSS has a mandatory 3-year lock-in period.
• Market Risks: Returns are market-linked and subject to fluctuations.
• Long-Term Perspective: ELSS is ideal for investors with a long-term horizon.

Who Should Invest in ELSS?

• Salaried individuals seeking tax deductions under Section 80C through the old regime.
• First-time investors looking for equity exposure with tax benefits.
• Long-term wealth builders aiming for high returns.

ELSS Taxation Rules

• Investments qualify for deductions up to ₹1.5 lakhs under Section 80C.
• After 3 3-year lock-in period, you don’t have to pay any Long-Term Capital Gains (LTCG) tax on ELSS gains up to ₹1.25 lakh. However, if your total capital gains amount to above ₹1.25 lakh, you’ll be taxed on the excess at 12.5% on the excess capital gains, with no indexation benefits.

An ELSS calculator is a valuable tool for tax planning and investment decision-making. By leveraging this tool, investors can make well-informed choices to maximise their savings and returns. Always assess market conditions and consult a financial advisor before investing.