How does the ELSS calculator work?

The Equity-Linked Saving Schemes are Tax-Saving Mutual Funds with three years lock-in period. They invest most of their assets in Equity Funds, the only fund category qualifying for Rs. 1.5 lakh tax deduction annually under Section 80C of the Tax Act. They also provide better returns than Fixed Deposits or Public Provident Funds. The ELSS has a calculator that lets you determine the returns from a potential investment.
It determines the potential returns based on the investment type, i.e., Systematic Investment Plans or Lumpsum Investments.
 
Information needed
The ELSS calculator is beneficial for all investors. Besides, they have the least lock-in period, and you can invest in them with an amount as low as Rs. 500. The details required to estimate the returns include investment type, value, duration, and return rate per annum. Upon entering the required data, the calculator estimates the potential returns. It allows investors to decide whether to continue investing.
 
Benefits
ELSS is a popular tax-saving option for investors wanting to take on some risk. The calculator helps develop an investment plan and determine its returns. It is free of cost and is easily accessible online to compute the maturity amount. You can quickly generate the maturity value for multiple investments, compare the returns, and finalise the values. It is quick, accurate, and does not require technical skills.
 
How does it work?
This Mutual Funds calculator works on a simple concept of the future value of an investment. Based on the inputs, it calculates the results instantly. For example, if you want to invest in these funds with a lumpsum of Rs. 1.5 lakh, your returns from the investment will be 12% over a tenure of seven years. The future value formula applicable here is:
FV = C(1+r)^t, where:
FV = Future Value
C = Investment
R = Expected Rate of Return
T = Time Horizon of Investment
Based on this formula, Anju’s investment maturity value is Rs. 3,31,602.21.
 
Points to note
Using this calculator, you can compare returns from SIP and Lumpsum before deciding your investment type. ELSS works like other Equity Funds, subject to market risks. Therefore, consider SIP for long-term investments. Likewise, you overcome short-term market fluctuations and average out risks.
 
Best time to invest
Investing with a long-term approach is the best way to maximise returns. Identify your goals at the start of the year and invest accordingly. Invest regularly throughout the year to reduce market volatility exposure and build wealth over time.
 
Conclusion
These funds have a short lock-in period, which lets you withdraw your money earlier in case any pressing financial goals arise. They invest primarily in the stock market, so they can potentially earn higher yields than other traditional tax-saving options. You also gain exposure to a diverse portfolio.