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What is ELSS?
The equity-linked savings scheme, known as ELSS, is an open-ended equity mutual fund that provides tax deductions according to Section 80C of the Income Tax Act, 1961. This particular type of mutual fund focuses on equities and is the only category of mutual funds eligible for tax benefits up to Rs. 1,50,000 per year. By investing in ELSS, you can potentially save Rs. 46,800 annually on your taxes.
ELSS portfolios are diversified and include equity-linked securities from companies across various market capitalisations and sectors. Additionally, a portion of the portfolio is allocated to fixed-income securities. Investing in ELSS allows you to enjoy the advantages of exposure to a well-diversified portfolio.
What is an ELSS Calculator?
An ELSS calculator is a tool that helps individuals estimate the potential returns and tax savings they can achieve by investing in Equity-Linked Savings Schemes (ELSS). It is designed to give users a quick and convenient way to calculate the same. Based on these the investment amount, the investment duration, the expected rate of return, and the individual's income tax bracket, the calculator generates projections of the investment value over time and calculates the tax savings that can be availed under Section 80C of the Income Tax Act, 1961.
By using an ELSS calculator, investors can assess the potential growth of their investments and make informed decisions regarding the amount they want to invest and the duration of the investment. It provides a useful tool for individuals to plan their tax savings and investment strategies more effectively.
The formula for calculating the maturity amount of an ELSS investment is as follows:
FV = C(1+r)^t
FV = Future Value
C = Investment
r = Expected rate of return
t = Time horizon of investment
How to Use an Online ELSS Calculator?
To use an ELSS calculator, follow these steps:
- Open the ELSS calculator: Access the online ELSS calculator on Angel One.
- Input investment details: Enter the investment amount you plan to invest in ELSS. This can be a lump sum amount or SIP. Specify the investment duration, which is the period you intend to stay invested in ELSS.
- Set the expected rate of return: Provide an estimated rate of return that you expect to earn on your ELSS investment. The actual rate can vary based on market conditions and the historical performance of ELSS funds. You can use an average rate of return or refer to past performance data.
- Determine your tax bracket: Identify your income tax bracket or tax rate. This information is crucial for calculating the tax benefits associated with ELSS investments. The tax bracket will determine the applicable tax savings under Section 80C of the Income Tax Act, 1961.
- Calculate the results: Click on the calculate or compute button to generate the results. The Angel One ELSS calculator will provide you with an estimate of the investment value at the end of the investment duration. It will also display the tax savings you can expect to achieve through ELSS investments.
- Analyse the results: Review the calculated investment value and tax savings. Assess whether the projected returns and tax benefits align with your financial goals and expectations. You can also adjust the inputs in the calculator, such as the investment amount or duration, to see how it impacts the results.
It's important to note that an ELSS calculator provides estimates and projections based on the inputs provided. The actual returns and tax savings may vary depending on market conditions and individual circumstances. It is essential to consult with a financial advisor or tax professional for personalised guidance and accurate calculations.
Taxation of ELSS Funds
ELSS funds provide taxable capital gains. Due to the 3-year lock-in period, only long-term capital gains can be realised. These gains, up to Rs. 1 lakh per financial year, are exempt from taxes. However, any gains exceeding this limit are subject to a 10% tax rate, without the benefit of indexation. On the other hand, mutual funds with dividends are added to an individual's total income and taxed at their applicable income tax slab rate.
Benefits of Online ELSS Calculator
- Accurate projections: By using the Angel One ELSS calculator, investors can obtain accurate projections of the future value of their investments. It takes into account the investment amount, expected rate of return, and investment duration to provide a realistic estimate of the potential growth.
- Tax savings estimation: One of the key advantages of ELSS investments is the tax benefits they offer. The calculator helps investors estimate the amount of tax savings they can potentially achieve by investing in ELSS, based on their income tax bracket and investment amount.
- Planning investment strategy: The Angel One ELSS calculator enables individuals to plan their investment strategy effectively. By inputting different investment amounts and durations, investors can analyze how it affects the projected returns and tax savings. This helps in making informed decisions about the optimal investment amount and duration.
- Comparing investment options: The ELSS calculator by Angel One can be used to compare different ELSS funds or investment scenarios. By inputting different expected rates of return or investment durations, investors can compare the potential outcomes and select the option that aligns with their goals and risk appetite.
- Time-saving and convenience: The calculator saves time and effort by providing quick calculations and projections. Investors can easily access it online on Angel One, making it a convenient tool for assessing the potential outcomes of ELSS investments.
- Financial planning and goal setting: The Angel One ELSS calculator facilitates financial planning by providing insights into the growth potential of ELSS investments. It helps individuals set investment goals, determine the required investment amount, and make adjustments based on their desired future value or tax savings.
An ELSS calculator is a tool that helps investors estimate the potential returns and tax savings they can achieve by investing in Equity-Linked Savings Schemes (ELSS). It takes into account factors such as investment amount, duration, expected rate of return, and tax bracket to provide projections of investment value and tax benefits.
ELSS calculators provide estimates based on the inputs provided by the user. The accuracy of the calculations depends on the inputs and the assumptions made by the calculator. It's important to understand that actual returns and tax savings may vary due to market fluctuations and individual circumstances.
As an example, let's consider a situation where you intend to invest Rs 1000 per month for a duration of 12 months, assuming an anticipated rate of return of 15%. By utilising the ELSS SIP Calculator, you can determine the eventual value of your SIP investment. The total amount you will have invested over the 12-month period is Rs 10,000 (INR 1000 multiplied by 12 months). At maturity, the value of this SIP is projected to reach Rs 10,106.
ELSS funds are an appealing choice for investors with a long-term investment horizon who aim to gain exposure to the stock markets while also enjoying tax-saving benefits.
The results provided by ELSS calculators are based on the inputs provided by the user and the assumptions used in the calculator. Market fluctuations, changes in tax laws, and other factors can impact the actual results. So, the results provided by ELSS calculators are not guaranteed.
While ELSS calculators can provide helpful estimates, it's always safe to consult a financial advisor or tax professional for personalised advice. They can consider your financial situation, goals, and risk tolerance to provide tailored recommendations and accurate calculations.