What is an ELSS Calculator and How Does it Work?

Feb 1st 2024

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ELSS, commonly known as Equity-linked Saving Scheme is considered a kind of mutual fund plan that is meant to provide tax saving benefits to investors. When an investor invests money in ELSS funds, the money is primarily invested in equity and equity-based securities of businesses across different market capitalization categories. Such schemes carry a lock-in period of 3 years. ELSS funds are thought to be a wonderful investor vehicle for those people who want to enjoy the double benefits of impressive returns on investment and great tax savings.

For those looking to invest in ELSS funds, it is recommended to use an ELSS calculator. An ELSS calculator is a web-based tool that is designed to help investors get an idea of the amount they can expect to get from their investments in ELSS funds. This calculator is free to use and helps you determine the maturity value of an SIP investment or lumpsum investment from ELSS funds.

What does ELSS mean?

Equity Linked Savings Scheme (ELSS) refers to a kind of mutual fund scheme that features tax benefits along with good returns on investment. By putting money in ELSS funds, the investors can choose to claim a rebate of up to Rs. 1.5 lakh under Section 80C.

Therefore, if you belong to the 30% tax bracket, you can reduce your taxable income by up to Rs 1.5 lakh and save taxes of an amount of up to Rs 46,800. In addition, ELSS funds can deliver double-digit returns, becoming a high-yielding investment option in today’s competitive landscape.

What does an ELSS calculator mean?

An ELSS Calculator refers to an online tool that helps people determine the overall expected return on their ELSS mutual fund investment over a particular period given the invested amount. It enables people to calculate the estimated returns for both lumpsum and sip investments. One just needs to enter basic details like scheme name, investment amount (SIP or lumpsum), and investment tenure.

After entering all the asked information, the ELSS Calculator will reveal the maturity amount of your investment, inclusive of the total invested value and profits accumulated. The ELSS calculator also reflects the return of additional protracted years in case you want to endure your investment for longer years. There is also an option to level up your investment amount and measure the return based on that. It helps you understand how your investment will grow over time and how much should be invested to attain the financial objectives.

There can be several advantages of using an ELSS calculator like:

It gives precise estimates of possible returns.
It becomes easier for an investor to compare the estimated return among different ELSS schemes.
It helps in the identification of the likely difference between the returns accumulated through SIP and the Lump sum investment method.
It increases the long-term wealth creation capability of an investment.
It helps people in financial planning, as they can easily decide the amount they should invest to accumulate the anticipated corpus.

How does an ELSS calculator work?

The ELSS mutual fund calculator is designed to help investors ascertain the possible returns from their investment in an ELSS fund given the investment type such as SIP or lump sum.

A person just needs to fill in the investment amount, the anticipated annual rate of return, the investment tenure, and the investment frequency in the case of SIP investments.

After providing all the aforementioned details, the ELSS calculator will show the value of an investment over the mentioned tenure.

Let's first get to know how to calculate SIP returns.

1. ELSS SIP Calculator: SIP (Systematic Investment Plan) is largely considered a kind of investment method, in which an investor systematically invests a small amount. You can also make SIP investments to invest in ELSS funds.

You may calculate your potential returns on your SIP contributions in ELSS with the aid of the ELSS SIP calculator. Entering the following data will allow you to determine the SIP maturity amount for an Equity Linked Savings Scheme investment:

Scheme Name: The name of the ELSS fund where the money is supposed to be invested.
Investment Amount: It refers to the monthly SIP amount that would be invested in the ELSS fund.
Investment Period: It means the time horizon for which the amount will be invested. Please note that an essential mandatory lock-in period of three years for ELSS investments. So don't get confused.

2. ELSS Lumpsum Calculator: With the lump sum approach, you make a single, large investment. You may also make lump sum investments using ELSS funds. Additionally, you may use this calculator to estimate your return in this scenario.

You must provide the following data to determine the maturity amount for an ELSS lumpsum investment:

Scheme Name: The name of the ELSS fund where the money is supposed to be invested.
Lumpsum Investment Value: It refers to the one-time lump sum amount that would be invested in the ELSS fund.
Investment Period: It means the time horizon for which the amount will be invested. Please note that an essential mandatory lock-in period of three years for ELSS investments.

How to use an ELSS Calculator?

If you have an idea of the amount that you wish to invest in ELSS funds every month, you can use the ELSS Calculator to determine the probable future worth of the monthly investments.

Refer to the following steps to get the expected result from the ELSS calculator-

Step 1: Choose the ELSS fund of your preference.
Step 2: Now, choose the investment mode - SIP or lumpsum.
Step 3: Mention the amount you want to invest.
Step 4: Pick the time horizon of your investment.

The calculator then shows the maturity value of the investments based on the expected rate of return, investment amount, and investment tenure.

The ELSS calculator would also reveal other important things related to the chosen ELSS fund like fund phase, assets under management (AUM), exit load, and the expense ratio of the fund.

FAQs

Q. How accurate is an ELSS calculator?

- The ELSS calculator is known to be precisely accurate. However, since ELSS returns are linked to stock markets, the rate of returns tends to vary. Hence, it is recommended to consider a conformist rate of return while determining your financial goals.

Q. What information should be provided to an ELSS Calculator Online?

- To utilize the ELSS Calculator online, you need to enter the amount that would be invested, the expected rate of return, and the time horizon for which you want to invest in the fund.

Q. What are the tax implications on ELSS funds?

- ELSS funds tend to offer taxable capital gains. The 3-year lock-in period restricts the amount that may be accumulated to long-term capital gains. These gains are tax-free up to a total of Rs. 1 lakh each fiscal year. Gains beyond this cap, however, are taxed at a rate of 10% and do not qualify for indexation. Conversely, dividend-paying mutual funds are included in an individual's total income and subject to taxation at the appropriate income tax slab rate.

Being a kind of SIP calculator, an ELSS Calculator can be used by investors to determine the probable returns from investments that can be by Section 80C of the Income Tax Act. Whether you invest the amount through SIP mode or lump sum mode, the ELSS calculator is a wonderful tool for people to determine the amount they can expect in the future by investing in an ELSS fund. Try our ELSS calculator today.

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