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Explore Our Mutual Fund Schemes
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What is an ELSS?
An ELSS (Equity Linked Savings Scheme) is a type of mutual fund scheme that primarily invests in equities, offering both tax-saving benefits and the potential for reasonable returns. Under Section 80C of the Income Tax Act, 1961, investments in ELSS are eligible for tax deductions of up to Rs. 1.5 lakh. in a financial year. The fund can be suitable for investors seeking long-term growth and tax savings. However, since it is equity-based, it also carries higher risks compared to other tax-saving instruments like Public Provident Fund (PPF) or National Savings Certificate (NSC).
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What is an ELSS Calculator?
An ELSS Calculator is a financial tool that helps investors calculate the potential returns and tax savings they can get from investing in ELSS mutual funds. It’s an easy-to-use online tool that estimates how much you could earn based on your initial investment, investment period, and expected rate of return.
This tool helps you plan your investments effectively and provides clarity on how much tax you can save by investing in ELSS funds, making it an essential tool for tax-conscious investors.
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How does an online ELSS calculator work?
The online ELSS Calculator works by taking basic details from the investor, such as the amount they plan to invest, the duration of the investment, and the expected rate of return (which can be an estimate based on historical performance). However, past performance may or may not be sustained in the future.
Based on these inputs, the ELSS calculator then calculates the potential returns and shows the final maturity amount. The tool also estimates the tax savings under Section 80C of the Income Tax Act, 1961, for the investor. It’s simple, easy to use, and helps you plan your investment goals by projecting the returns you can expect in the future.
Formula of ELSS Calculator with example
The formula used in the ELSS Calculator is:
Future Value = Investment Amount × (1 + Rate of Return)^Time Period
For example, if you invest Rs. 10,000 per month in an ELSS mutual fund for 5 years at an expected return of 12% per annum, the ELSS Calculator would calculate your potential returns based on this formula. After 5 years, your total investment of Rs. 6,00,000 (Rs. 10,000/month for 5 years) could grow to Rs. 8,24,864 depending on the performance of the fund. This helps you see how much your money could grow, making it easier to plan your financial future.
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How to use an ELSS Calculator effectively?
To use an ELSS Calculator effectively, first input the amount you want to invest, either as a lumpsum or through SIP (Systematic Investment Plan). Then, select the investment duration (the number of years you plan to stay invested). After that, enter your expected annual return rate.
The calculator will give you the projected future value of your investment, including any tax savings. Using this tool helps you visualize how your money will grow over time, making it easier to make informed decisions about investing in ELSS mutual funds.
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Benefits of using an ELSS calculator
Estimate returns
The ELSS calculator helps you project returns based on your investment amount, duration, and expected returns, allowing for better financial planning.
Simplify tax calculations
It simplifies the process of understanding the tax savings you can achieve through your ELSS investments, helping you optimize benefits.
Future growth visualization
As an online tool, the ELSS Calculator is accessible anytime, anywhere, and helps you visualize your investment’s growth, aiding in informed decision-making.
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Frequently Asked Questions
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Investing in ELSS offers tax deductions under Section 80C of the Income Tax Act, 1961, helping you save on taxes. Additionally, it provides relatively better return potential than traditional saving schemes due to its equity-based investments. ELSS also has a relatively short 3-year lock-in period, offering liquidity.
The tax on ELSS mutual funds is calculated based on capital gains. Short-term capital gains (if sold within 1 year) are taxed at 20%. Long-term capital gains above Rs. 1.25 lakh per financial year (after 1 year) are taxed at 12.5%. The ELSS Tax Calculator helps estimate this easily.
ELSS can be suitable for individuals who have a higher risk appetite and want to save taxes while investing for the long term. It can also be suitable for those looking to invest in equities but with the added advantage of tax savings under Section 80C of the Income Tax Act, 1961.
Yes, the ELSS calculator is accurate in estimating potential returns and tax savings based on the data you input. However, the actual returns may differ, as they depend on market conditions, which the calculator does not consider in real-time.
No, the ELSS Calculator does not account for real-time market conditions or fluctuations. It uses historical performance data to project returns. While it gives an estimate, actual market performance can vary, which may affect the final returns.
To use the ELSS Calculator online, you need to input details such as the investment amount, the tenure (duration) of investment, and the expected annual return rate. Based on this data, the calculator provides estimates for returns and tax savings.
No, the ELSS Calculator doesn’t factor in real-time market conditions. It uses an assumed or average expected return to calculate potential gains and tax savings. Actual returns can vary depending on how the market performs over the investment period.
When using the ELSS Calculator, you need to fill in your investment amount, the duration for which you intend to stay invested, and your expected annual rate of return. The calculator will use these details to give you estimated returns and tax benefits.
Yes, investing in ELSS involves market risk because these funds invest in equities. While they offer relatively better returns potential in long term than fixed-income options, the risk of loss is also higher. However, over the long term, ELSS has the potential to outperform other tax-saving instruments.
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Disclaimer: The calculator alone is not sufficient and shouldn’t be used for the development or implementation of an investment strategy. This tool is created to explain basic financial /investment related concepts to investors. The tool is created for helping the investor take an informed decision and is not an investment process in itself. Mutual Fund does not provide guaranteed returns. Investors are advised to seek professional advice from financial, tax and legal advisor before investing.
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- Bajaj Finserv Asset Management Limited has been referred to as Bajaj Finserv AMC.
Copyright: All Rights reserved at Bajaj Finserv Asset Management Limited
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