Tax-Saving Math: Analyzing Returns Using An ELSS Calculator

It is a truth universally acknowledged that tax can’t be escaped. Yet, strategic finacial planning and decision-making may help in minimising the impact of tax on an individual’s hard-earned money. In the oeuvre of investment, too, investors look for tax-saving funds that will not only offer potential wealth creation but also tax benefits.

Such a mutual fund is an ELSS or Equity Linked Savings Scheme where investors may invest through their demat account and secure tax benefits under Section 80C of ITA (Income Tax Act).

However, if you want to make the most out of your ELSS investment, it is essential to develop a thorough understanding of the tax implications and the returns. For this, an ELSS calculator will prove highly effective for analysing returns, assessing tax savings and making informed investment decisions. Let’s learn more about ELSS and how to analyse returns using an ELSS calculator.

Table of Contents

ELSS Calculator- Meaning

An ELSS calculator is an online software that acts as a financial tool helping individuals in planning and analysing their ELSS mutual fund investments. ELSS funds retain the dual benefit of offering potential capital appreciation as well as adequate tax savings. Several essential functions served by ELSS calculators are listed below:

It provides an estimate of tax savings that one can secure by investing in ELSS funds; it calculates the total tax deduction an investor is eligible for a particular financial year.
It also helps in planning the ELSS investment by offering a projection of the potential growth over time.
The calculator may also offer comparative analysis of various ELSS investment scenarios. This helps one to choose the right fund on the basis of performance history, expense ratio and risk profile.
ELSS calculators also come with goal-tracking features, allowing the investor to monitor the progress towards the financial objectives of an individual.

How To Analyse Returns With ELSS Calculators?

Here’s a step-by-step guide on how one can analyse the return over a particular period using the ELSS Calculator:

Step 1: Choose A Reliable ELSS Calculator:

The first step would be to choose a reputable ELSS calculator. Such a calculator is readily available on mutual fund platforms, facial websites and mobile apps. All you need to ensure is that the calculator offers comprehensive features for ELSS return analysis.

Step 2: Input The Details Of Your Investment:

Inputting the details involves entering the initial amount of investment, the time horizon for which one intends to invest, and the expected annual rate of return.

Step 3: Review Tax Benefits:

Determine the tax deduction limit applicable under Section 80C of ITA. Ensure that the planned amount for ELSS investment doesn’t exceed the limit, which is ₹1.5 lakh for each financial year.

After all the inputs are entered correctly, the ELSS calculator will provide you with an expected growth projection on the basis of your input.

Conclusion:

Therefore, the projections of ELSS calculators offer the investor an idea concerning how the investment is likely to grow over time, thereby helping in assessing whether the investment aligns with the long-term financial objectives of an individual.