Best online tax calculator and tax savings through mutual funds
What if we tell you that with proper planning and tax calculation, you could build long-term wealth while at the same time-saving money on taxes? This is pretty much possible if you keep a sharp eye on your tax liabilities and plan your investments accordingly.
What is an online tax calculator and how does it work?
An income tax calculator is a digital tool that determines the amount of income tax you are obliged to pay to the government. When talking about the best income tax calculator in India, we at Simplifysors, are amongst the top websites widely used by top-notch companies to calculate the tax liabilities. As a leading mutual fund distribution agency, we also provide professional consultation on different means to save tax and increase wealth through mutual funds investment.
How to save tax through mutual funds?
An equity-linked savings plan (ELSS) is a kind of mutual fund that can also be used to save money on taxes.
It is the only type of mutual fund that qualifies for a tax deduction under Section 80C of the 1961 Internal Revenue Code. You can earn up to Rs 1,50,000 in tax benefits and save up to Rs 46,800 in annual taxes by investing in ELSS mutual funds.
The asset allocation of ELSS mutual funds is heavily weighted toward equities and equity-linked instruments, such as listed stocks, with equities and equity-linked instruments accounting for 65% of the portfolio. Additionally, they may have some exposure to fixed-income assets. These funds have a three-year lock-in period, the shortest of any Section 80C investment.
What distinguishes ELSS funds from other mutual funds?
These are some of the most important aspects of ELSS mutual funds:
- They entitle taxpayers to annual tax deductions of up to Rs 1,50,000 pursuant to Section 80C of the Income Tax Act. ELSS funds are subject to a three-year lock-in term and do not allow for early withdrawal.
- There is no maximum amount that can be invested in an ELSS, and the minimum amount that can be invested varies from fund company to fund company.
- Investments in exchange-traded funds (ETFs) are the only tax-advantaged investments with the potential to outperform inflation.
- Investing in ELSS funds provides you with tax advantages as well as the possibility to accumulate money over time.
- The portfolio of an ELSS fund is mostly in the stock market with a few fixed-income instruments thrown in for good measure as well.
What factors should you consider before investing in ELSS-related securities?
Tax Liability: First and foremost, calculate your tax liability through our online tax calculator.
If you are paying a large chunk of your hard-earned money as tax, you must consider investing in ELSS or any other fund that provides tax exemption.
Investment Horizon: Before you begin investing in ELSS funds, you must have at least a five-year time horizon. Because of the equity component of ELSS funds, a longer investment horizon is required to limit market volatility and maximise profits.
Returns: Returns are not guaranteed with ELSS funds because their performance is entirely contingent on the performance of the underlying equities. On the other hand, a time horizon of more than five years may provide better returns than any other tax-saving investment strategy.
Three-Year Lock-In Period: ELSS mutual funds have a three-year lock-in period. Your assets are required to be locked in for three years following the date of investment, and you will not be able to redeem your holdings until that time has passed.
Saving money on a regular basis:
Given that your ELSS investment is locked in for three years, you may leverage it by establishing a healthy savings habit that lasts for life. In some cases, a systematic investment plan may be advantageous to you. ELSS allows you to make monthly investments as little as Rs 500. You will begin to reap the rewards of capital appreciation on a monthly basis three years after making your initial investment.
The road to equity:
For newcomers to the stock market, ELSS may be an excellent approach to obtain valuable experience trading in the stock market. An investor who is considering investing in an ELSS fund may be comforted by the fact that the funds are professionally managed. Following the success of a pure equity product such as ELSS, you will be encouraged to experiment with other equity-linked products available on the market in the future.
Mutual fund investment carries with it the risk of the stock market. Specifically, this is true in the case of stocks and bonds. Because ELSS is predominantly invested in stocks, the fund’s performance may be adversely affected when the market is not performing well. Furthermore, ELSS is subject to all of the risks associated with equity investing, as well as other dangers.
Things to consider before investing in ELSS
Not every ELSS fund is successful in its endeavours. ELSS funds, in contrast to other forms of mutual funds, do not disclose their investment strategy to the public. Some funds invest primarily in large-cap stocks, whereas others invest in mid-cap stocks, small-cap stocks, or a combination of the three types of companies. Investors commonly make the mistake of investing in a fund that is performing well at the time of purchase. The investing pattern of a fund in relation to your risk tolerance should be evaluated before selecting one, in the best-case scenario.
We, at Simplifysors, provide the best investment advice on tax savings and wealth generation. Our online income tax calculator will assist you in accurately calculating your tax liabilities. If you wish to have a well-managed portfolio investment portfolio, you can get in touch with us. We will be more than eager to assist you with our state-of-the-art service.