What is an ELSS Calculator?
An Equity Linked Savings Scheme (ELSS) fund calculator is an online tool to help investors calculate the
maturity value of their investments in ELSS funds. Online ELSS calculators assist investors in calculating
potential profits and tax savings on their ELSS investments along with their maturity value.
ELSS i.e. Equity Linked Savings Scheme is a tax-saving product designed to provide investors with an
opportunity to participate in the stock markets through mutual funds along with availing tax benefits. ELSS
calculator helps investors make informed decisions on the amount to be invested in ELSS funds to maximize
their tax savings while staying aligned with their financial goals.
An Equity Linked Savings Scheme (ELSS) is a type of mutual
fund investment scheme in India that primarily invests in equities and related securities. ELSS
funds are known for their dual benefit of potentially offering capital appreciation through equity investments and providing tax benefits up to Rs 46,800 under Section 80C of
the Indian Income Tax Act. ELSS funds have a mandatory lock-in period of three years. ELSS funds are popular
among investors looking for tax-saving investment options with the potential for long-term wealth creation.
An online ELSS return calculator makes the task of determining the investment amount, understanding the
potential tax savings, and visualizing the final value of ELSS investment easier for investors.
How does an ELSS Calculator work?
An ELSS tax Calculator works by using a formula to estimate the future value of your ELSS investment and the
potential tax benefits linked under Section 80C of the Income Tax Act. An online ELSS Calculator helps
investors plan investments effectively, understand potential returns, and assess tax benefits linked with
ELSS investments.
Motilal Oswal’s newly updated ELSS return Calculator helps you get an estimate of your investments in the
future by doing complex calculations at an instance. This is how the calculator works:-
To get an estimate on your ELSS investments, you are required to provide the following input data:
- Your monthly investment or your one-time investment –
This means the amount that you plan to invest in the ELSS fund.
- The tenure of your investment – This indicates the
number of years for which you intend to hold on to your ELSS investment.
- Expected Rate of Return – Your estimate of the
annualized rate of return you expect to earn from the ELSS fund.
- ELSS tax benefit – Calculator helps investors plan their
investments effectively, understand potential returns, and assess the tax benefits associated with ELSS
investments, which makes it a valuable tool for tax planning and investment strategy in the long run.
Let’s simplify this with an example
Suppose you plan to invest ₹1,00,000 lumpsum in an ELSS Mutual Fund scheme with an annual expected return of
12% for 3 years. You want to calculate the maturity amount of this investment using the formula:
Maturity Amount = P × (1 + r)^n
P - (Initial Investment): ₹ 1,00,000
r - (Annual Interest Rate): 12% or 0.12
n - (Investment Duration): 3 years
Substituting these values in the formula, we get -
Future Value (FV) = ₹1,00,000 × (1 + 0.12)^3
Maturity amount ≈ ₹1,40,493
So, the maturity amount of your Lumpsum ELSS investment of ₹100,000 at 12% returns for 3 years would be
approximately ₹1,40,493.
Consider a second example, where you would like to invest ₹5,000 in an ELSS Mutual Fund scheme by
contributing monthly. In this case, we will use the following formula -
M = P × ({[1 + r]^n – 1} / r) × (1 + r)
Substituting
P = 5,000
r = 12% or 0.12
n = 3 years,
We get
M = P × ({[1 + r]^n – 1} / r) × (1 + r)
M = 5,000 x ({[1+0.12]^3-1/0.12) x (1+0.12)
M = 2,17,538
So, the maturity amount on your SIP ELSS Fund for a monthly investment of ₹5,000 at a return of 12% for 3
years would be approximately ₹2,17,538.
What are the key advantages of using an online ELSS Calculator?
Using an online ELSS Calculator offers several key advantages for investors, such as financial and tax planning, goal setting, risk assessment, etc. Through an
online ELSS Calculator, investors can get an estimate of their returns made through lumpsum or SIP investments.
While there are multiple advantages of using an ELSS funds Calculator, we have jotted down some important
ones, such as:
- Tax Planning- ELSS calculators help investors plan their
tax-saving investments effectively. They calculate the potential tax savings by estimating the deduction
under Section 80C of the Income Tax Act, based on the ELSS investment amount. To know more about how you
can save on taxes through investments in ELSS schemes, read our blog here
- Goal-Based Investing- ELSS calculators allow investors
to set specific financial goals, such as saving for a child's education, buying a house, or retirement
planning. They help investors calculate the required ELSS investment to achieve these goals.
- Risk Assessment- By considering past ELSS returns and
market performance, these calculators assist investors in assessing the risks and potential rewards
associated with ELSS investments. Investors can make informed decisions based on their risk tolerance.
- Maturity Value- Investors can estimate the maturity
value of their ELSS investments, which is helpful for long-term planning. The calculator shows the
potential corpus that can be accumulated over the investment period.
- Regular Monitoring- ELSS calculators can be used to
track the progress of ELSS investments over time. Investors can input updated investment amounts and
assess whether they are on track to achieve their goals.
How to use an ELSS calculator effectively?
Using an ELSS return calculator, you can compare the maturity value of various tax saving options and make
informed decisions in line with your financial goals. To use an ELSS calculator, all you need to do is
provide basic inputs like monthly or lumpsum investment amount, duration, and expected rate of return.
Below are the tips to make the maximum use of ELSS fund calculators:
- Input Accurate Data- Providing accurate details like
your investment amount, expected rate of return, and investment duration will make the results more
reliable. You should have realistic expectations of returns from ELSS which can be in the range of 12%
to 16% on a conservative side.
- Understand Tax Benefits- ELSS investments offer tax
benefits under Section 80C up to Rs. 46,800. Use the calculator to estimate your tax savings for a given
financial year based on your investment amount and adjust your investments accordingly. The maximum
investment amount you can claim tax benefits on is Rs. 1.5 Lakhs.
- Compare Tax-Saving Options- Use the ELSS calculator to
check the difference between the maturity value of ELSS investments and other tax-saving options like Fixed Deposits, NSCs, Provident funds, etc.
- Check Lock-in Period- ELSS has a lock-in period of 3
years. Make sure that your goals are not immediate if you are investing in an ELSS fund.
- Consult Financial Advisor- While the calculator provides
an estimate, it's always good to consult a financial advisor for personalized advice. They can help you
align the calculator's output with your financial goals.