Urban Money

ELSS Calculator

Urban Money ELSS Calculator is a cutting-edge tool that helps investors understand the potential profits from an ELSS fund. The calculator calculates the prospective profits based on the type of investment, such as SIP investment or lumpsum investment.

What is an ELSS Investment?

ELSS mutual funds fall in the category of open-ended equity mutual funds. The majority of the assets are invested in stock and equity-related products. ELSS funds help you save money on taxes while also giving you the chance to unlock the opportunities of expanding investment. It has also been designated as tax-advantaged funds to encourage long-term investing and saving.

ELSS funds are the only mutual funds that cater to a tax deduction of INR 1.5 lakhs per year under the Income Tax Act, Section 80C. These funds outperform other tax-saving alternatives, including PPF and FD. It offers the shortest lock-in time of all the tax-saving options. With an amount as little as INR 500, one can begin investing in ELSS funds. Investors have the option of investing through SIPs or making a one-time payment via lumpsum investment.

What is an ELSS Calculator?

Urban Money's ELSS Calculator is an advanced AI-based tool that helps investors determine the potential profits from an ELSS fund. The calculator calculates the prospective profits based on the type of investment, such as SIP or Lumpsum. To estimate the returns, the ELSS calculator requires the following information:

  • Type of Investment
  • Value of Investment
  • Investment Period (>= 3 years)
  • Rate of Return per annum

Once you provide the required inputs, the calculator provides you with an approximate value of the estimated potential returns. By having such a figure beforehand, you will have clarity about your investment decision, i.e. to move or not to move with the investment further. One can easily compute the value of SIP returns and Lumpsum returns by using Urban Money's ELSS return calculator.

How Does an ELSS Calculator Work?

Urban Money's ELSS calculator is based on a simple concept of an investment's future worth. The calculator calculates the maturity value of an investment depending on the inputs. Crunching such numbers manually is not only complicated but time-intensive. The calculator completes the identical task in a matter of seconds.

Consider the case of Ritu, who wishes to invest INR 1.5 lakhs in ELSS funds. She anticipates a return of 12% on her investment and plans to hold it for seven years. The future value formula is as follows:

FV = C(1+r)^t

Where,

  • FV denotes the future value,
  • C defines the investment
  • r represents the expected rate of return
  • t stands for the investment time horizon

When we put the given values in the formula, the maturity value of Ritu's investment accounts for INR 3,31,602.21.

The future value principle also applies to SIP investment. However, because SIPs involve several cash flows, the idea of annuity is introduced to make computations easier.

Using an ELSS calculator, all of these calculations may be completed in split seconds. Returns from these funds can be calculated using any SIP ELSS calculator or Lumpsum ELSS calculator.

How Can an ELSS Return Calculator Help You?

For investors who are ready to take a chance, ELSS investments are the finest tax-saving choice. In addition, among the other Section 80C tax-saving plans, ELSS mutual funds have the shortest lock-in period.

The ELSS return calculator assists investors in calculating investment returns. The benefits of Urban Money's ELSS mutual fund calculator are as follows:

  • It offers access to an easy-to-use free online calculator that offers quick computation of the scheme's maturity amount, enabling you to make more informed investment decisions.
  • You get the seamless computation of the maturity value for various investment amounts and a comparison of returns. Such data helps you in finalising your ELSS investment value.
  • The ELSS return calculator provides quick and accurate output.
  • You can compare ROIs generated via SIP and Lumpsum investment.

Benefits of ELSS Investments

With ELSS investments, you open the door to numerous benefits, including tax benefits, minimum lock-in period, higher rate of return, dividend and growth options and much more.

Tax Benefit

When you invest in ELSS schemes, you get the option to claim income tax benefits under Section 80. Such schemes offer maximum tax benefits contrary to other schemes and thus, are termed tax saving mutual funds. It falls under the category of EEE status (Exempt-Exempt-Exempt), where EEE represents the status of the invested amount, income earned as well as maturity proceedings. All three are exempted from income tax.

  • Amount Invested: Deduction of INR 1.5 lacs at maximum under Section 80C of the Income Tax Act, 1961.
  • Income Earned: The dividend that individuals and HUF receive from ELSS schemes are exempted from taxation under Income Tax Act, Section 10(35).
  • Section 112A of the Income Tax Act, 1961 exempts long-term capital gains (net sales proceeds minus investment amount) of maximum INR 1 lacs from taxation. In case overall gains exceed INR 1,00,000, it will be liable for taxation at a fixed rate of 10%.

Minimum Lock-in Period

The lock-in period for ELSS schemes is three years from the date of unit allocation. These units can be redeemed or swapped after the lock-in period expires. Investors are bound to not sell out, redeem, pledge or transfer the invested amount. Additionally, they don't have the authority to alter their holdings in the fund during the lock-in period.

Contrary to other available options, which fall under Section 80C, the ELSS scheme offers the shortest lock-in time. For instance, PPFs have a 15-year lock-in time, whereas NSC investments have a 6-year lock-in period, and even the tax-deferred bank fixed deposits have a 5-year lock-in period.

Higher Rate of Return

Equities account for a significant component of the fund's portfolio (at least 80% of the total), consequently delivering better returns than other investment products. In general, they provide better long-term returns (14-16%) than other tax-saving options (5-7 years).

Because all ELSS schemes are oriented to equity and simultaneously market-linked, you cannot ignore the high-risk factor associated with the same. However, AMC's strategy is divided into three categories: large-cap, mid-cap and small-cap, with risk and rewards varying correspondingly. As a result, the schemes give you the freedom to take risks when investing.

A Choice between Dividend and Growth Option

As an investor in ELSS schemes, you get the option to pick either a dividend or growth option. The investor is supposed to choose the convenient option at the time of making an investment in an ELSS scheme.

  1. Dividend Option: When a dividend is declared by the fund, even during the lock-in period, investors receive a regular dividend income. The best part about such payouts is that they are tax-free. Dividend payments are contingent on profits and the board's approval of the scheme. It means that if the company does not make a profit, it is not bound to pay a dividend to the investors.
  2. Growth Option: During the lock-in period, the investor will receive no return. Annual earnings will be accumulated and re-invested.

Both of the alternatives above will get the same result. The dividend is paid to the investors from the scheme's Net Asset Value, resulting in a drop in the NAV at the closing of the lock-in period. To determine specific profits that you will generate at the time of the closing period, count on the ELSS mutual funds calculator.

Under an ELSS scheme, the investor has the benefit of choosing the dividend option. If the dividend payout is declared, the investor can access those gains even if the fund is locked in for three years. This option is not accessible in any other Section 80C investment schemes.

Flexible Investment Options

You can invest in ELSS Scheme through any of the below-mentioned options:

  • SIP (Systematic Investment Plan): Little investments spread over a specific time frame.
  • Lumpsum Amount: Full investment at once.

The maximum amount that can be invested in an ELSS is unrestricted. However, you can begin investing in ELSS funds with a small initial investment of INR 500. You can get diligent with your investing and tax planning with the possibility of monthly investments. 

SIPs are often advised since they spread your investment over a longer period of time and eliminate the risks associated with market peaks on the downside.

High Level of Transparency

You get the benefit of keeping track of the worth of your portfolio on a regular basis. Having access to this data allows you to make more informed judgments about the overall return on your diverse portfolio. Any other tax-saving investment choice does not provide this level of clarity.

Dual Tax Benefit

The amount invested in an ELSS is deductible up to the restrictions set forth in Section 80C of the Income Tax Act. However, the profit/capital gain generated by the ELSS Scheme is tax-free. Returns from National Savings Certificates or tax-deferred bank FDs are fully taxable and must be included in income. Only the PPF provides a tax-free return, but it comes with a 15-year maturity term. You get the option to compute the tax benefits through the ELSS tax calculator.

Frequently Asked Questions (FAQs)

How is ELSS calculated?

ELSS is calculated through the future value formula, i.e. FV = C(1+r)^t, where C defines investment, r represents the expected rate of return, and t stands for the investment time horizon.

What are the disadvantages of ELSS?

Along with its several benefits, ELSS comes with certain disadvantages too. These include limited tax benefits, inherent risks, no premature withdrawal and selection of schemes.

Is capital gain on ELSS taxable?

The Long-Term Capital Gains earned from ELSS are exempted from taxation. The amount is limited to INR 1 lakh. However, the dividend received is free from tax.

What is the lock-in period of ELSS?

The lock-in period of the ELSS scheme is three years.

Who should invest in ELSS?

Anyone can invest in the ELSS scheme as it comes with an array of benefits such as tax benefits, minimum lock-in period, high rate of returns, flexibility, transparency, investment options and much more.