ELSS Calculator
ELSS Calculator
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What is an ELSS Calculator?
The ELSS calculator is a valuable financial tool for investors. It aids in understanding equity-linked savings schemes by providing a quick estimate of potential returns and tax benefits. Simply input your investment details, like the investment amount, investment type (SIP or lumpsum) to explore different scenarios, calculate tax savings under Section 80C, and align your investments with financial goals.The ELSS calculator helps both experienced and novice investors make informed decisions, ensuring they leverage the benefits of the fund effectively.
How Much Tax Can You Save By Investing in ELSS Fund?
Equity Linked Saving Schemes or ELSS are a popular tax-saving investment option. But what exactly are the tax benefits? Let's break it down.
Tax Deduction under Section 80C: ELSS investments qualify for a tax deduction under Section 80C of the Income Tax Act, 1961. This means you can reduce your taxable income by the amount you invest in ELSS funds, up to a maximum of Rs. 1,50,000 per year.
Considering an annual income of Rs. 16,00,000, let's see how ELSS helps with tax savings.
Scenario 1: Without ELSS
| Income Slab | Taxable Income | Tax Rate | Tax Amount |
|---|---|---|---|
| Rs. 2,50,000 | Nil | Nil | Nil |
| Rs. 2,50,000 to Rs. 5,00,000 | Rs. 2,50,000 | 5% | Rs. 12,500 |
| Rs. 5,00,000 to Rs. 10,00,000 | Rs. 5,00,000 | 20% | Rs. 1,00,000 |
| Rs. 10,00,000 to Rs. 15,50,000* | Rs. 5,50,000 | 30% | Rs. 1,65,000 |
| Tax Liability | Rs. 2,77,500 | ||
| Cess @4% | Rs. 11,100 | ||
| Total Tax Liability | Rs. 2,88,600 |
*Standard Deduction of Rs. 50,000
Scenario 2: With ELSS
| Income Slab | Taxable Income | Tax Rate | Tax Amount |
|---|---|---|---|
| Rs. 2,50,000 | Nil | Nil | Nil |
| Rs. 2,50,000 to Rs. 5,00,000 | Rs. 2,50,000 | 5% | Rs. 12,500 |
| Rs. 5,00,000 to Rs. 10,00,000 | Rs. 5,00,000 | 20% | Rs. 1,00,000 |
| Rs. 10,00,000 to Rs. 14,00,000* | Rs. 4,00,000 | 30% | Rs. 1,20,000 |
| Tax Liability | Rs. 2,32,500 | ||
| Cess @4% | Rs. 9,300 | ||
| Total Tax Liability | Rs. 2,41,800 |
*Standard Deduction of Rs. 50,000 + ELSS Deduction of Rs. 1,50,000 = Rs. 2,00,000
Tax Savings with ELSS:
By subtracting the total tax liability with ELSS (Scenario 2) from the total tax liability without ELSS (Scenario 1), you get the tax savings:
- Tax Savings (Rs. 2,88,600 – Rs. 2,41,800) = Rs. 46,800
Key Takeaway:
Investing Rs. 1,50,000 in ELSS can potentially save you Rs. 46,800 in taxes (including cess). This is because ELSS reduces your taxable income, thereby lowering your overall tax liability.
ELSS not only offers tax benefits but also the potential for long-term capital growth through equity investing. However, ELSS funds come with a lock-in period of 3 years. Investing in ELSS is a smart way to save on taxes and grow your wealth for the future. Use our ELSS tax calculator to know the potential tax savings based on your income.
How Can an ELSS Calculator Help You?
An ELSS calculator is primarily designed to help you estimate the returns on your ELSS investments. Beyond that, it serves several other purposes:
- Allows you to visualise the impact of ELSS investments on your tax liabilities.
- Allows you to compare expected returns from different ELSS funds.
- Identifies potential differences between returns from SIP and lumpsum methods.
- Illustrates the long-term wealth creation potential of your investment.
- Aids in financial planning, helping you decide the necessary investment for achieving your desired corpus.
How to Calculate ELSS Maturity Amount?
The formula for calculating your ELSS maturity amount is FV = C(1+r)^t
Where:
FV - Future value of investment
C - Initial investment amount
r - Expected rate of return
t - Tenure
Let us illustrate this with an example:
Assuming you invest a lump sum of Rs. 3 lakhs in an ELSS fund with an anticipated rate of return of 12% over seven years, the maturity amount could be approximately Rs. 6,63,204. Similarly, initiating an SIP of Rs. 6,000 monthly for seven years at an expected rate of return of 12% might yield around Rs. 7,91,874 at the end of the tenure. It is crucial to recognize that the future value can fluctuate based on various factors, so consider these results as estimates rather than guarantees.
Examples of ELSS Funds Calculation
Understanding the formula mentioned above becomes clearer through the following illustration:
1. ELSS Lumpsum Calculation
Investor: Mr. Kumar
Lump Sum Investment: Rs. 80,000
Investment Duration: 5 years
Expected Return Rate: 12%
Result: According to the calculator, Mr. Kumar's investment is expected to grow to Rs. 1,40,986 at maturity.
2. ELSS SIP Calculation Investor: Ms. Priya
Monthly SIP: Rs. 1,500
Investment Tenure: 3 years
Expected Annual Return: 10%
Result: As per the calculator, Ms. Priya's SIP is estimated to yield Rs. 63,195 at maturity.
Advantages of ELSS Calculator
User-Friendly Insights
The calculator provides a simple process for users to input investment details and receive instant insights into potential returns and tax benefits.
Scenario Exploration
Investors can experiment with various investment scenarios, adjusting parameters like investment amount and tenure to understand the outcomes.
Tax Savings Computation
The calculator precisely calculates tax savings under Section 80C, offering a clear picture of the potential benefits of investing in equity-linked savings schemes.
Informed Decision-Making
Both seasoned and amateur investors can make well-informed decisions by visualizing the impact of different investment choices on returns and tax liabilities.
Financial Goal Alignment
ELSS calculators help align investments with financial goals, ensuring a strategic approach to tax-saving investments.
Related Calculators
ELSS Calculator
Investing in Equity Linked Saving Schemes (ELSS) offers double benefits: potential wealth creation and tax savings.
Frequently Asked Questions
The taxability of ELSS funds after 5 years depends on what you're referring to: However, in general, after 5 years,
- The initial investment (up to Rs. 1.5 lakh) remains tax-deductible under Section 80C.
- Long-term Capital Gains (LTCG) up to Rs. 1 lakh is tax-free.
- LTCG above Rs. 1 lakh is taxed at 10%.
