Bump worth vs income tax vs inflation: If we invest an amount, our investment value is likely to increase in time. Eventually, it can jump to 10x, 15x or more. The power of compounding is playing on its conversation with our little investment in a giant corpus. But if we redeemed this value, there are two reasons affecting its value – inflation and tax income. Inflation eats a large part of the return of investment.
Once we redeem an investment, we also need to pay its taxes.
So the real value of our investment can be less than the calculators can see.
In this writing, we calculate the act of the actual value of an Rs 1 lakh lakh lump over the perspective of 12 percent, 6 percent, in fact.
See estimates known-
How a fund’s progress
A single fund fund in an equity-oriented fund is appropriate for investors with a long-term investment progress in time, and the power of compouate is more visible in time over time.
If you invest RS 2.50 lakh now and expect a 12 percent return from this, how your investment grows in 10, 20, and 30 years.
In 10 years, the estimated capital obtained can be Rs 5,26,462, and the estimated corpus can be 7,762.
In 20 years, the estimated capital obtained can be Rs 21,61,573, and the estimated corpus can be Rs 24,11,573.
In 30 years, approximately earned capitals can be Rs 72,39,981, and the estimated corpus can be eV 7,89,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98, 98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,98,9811.
You can see that the investment value is more powerful because of the power of compound effect.
How inflation impacts your return
Let’s tell your investment Rs 2 lakh in a mutual fund design at 12 percent while inflation rate 6 percent. You have a 20-year investment investment.
While the amount of your estimated corpus in 20 years can be Rs 19,29,259, in a 6 percent inflation rate, the real value is Rs 6,01.96.
Income tax
If you redeem your fund investment, you also have to pay income taxes, even if you change the scheme from the same fund at home.
For equity oriented equity, long term tax profits (LTCG) tax rate is 12.5 percent above and above Rs 1,25,000 exemption.
Suppose your investment ltcg is Rs 5 lakh. After an Rs 1.25 Lakh exemption, your tax capital gains is Rs 3.75 Lakh, and the estimated tax of 12.5 percent rate is Rs 46,875. Corpus amount in post-tax can be Rs 4,53,125.
Calculations for the story
We can calculate the amount altered with inflation an Rs 1 Lakh Lump Sum to invest in a mutual fund for 20 years.
The annual return of investment can be 12 percent annual, while drinking inflation can be 5, 6, and 7 percent.
LTCG Tax calculate a 12.5 percent rate.
The amount of Rs 1 lakh investment in 20 years
In 20 years, approximate capital gains from a PRS 1 lakh investment at 12 percent annual rates can be Rs 9,64,64,629.31.
| End of the year | The amount of investment |
| 1 | ₹ 1,12,000.00 |
| 2 | ₹ 1,25,440.00 |
| 3 | ₹ 1,40,492.80 |
| 4 | ₹ 1,57,351.94 |
| 5 | ₹ 1,76,234.17 |
| 6 | ₹ 1,97,382.27 |
| 7 | ₹ 2,21,068.14 |
| 8 | ₹ 2,47,596.32 |
| 9 | ₹ 2,77,307.88 |
| 10 | ₹ 3,10,584.82 |
| 11 | ₹ 3,47,85555.00 |
| 12 | ₹ 3,89,597.60 |
| 13 | ₹ 4,36,349.31 |
| 14 | ₹ 4,88,711.23 |
| 15 | ₹ 5,47,356.58 |
| 16 | ₹ 6,13,039.37 |
| 17 | ₹ 6,86,604.09 |
| 18 | ₹ 7,68,996.58 |
| 19 | ₹ 8,61,276.17 |
| 20 | ₹ 9,64,629.31 |
The income tax on Rs 9,64,629.31 corpus
After an Rs 1,25,000 exemption, tax capital earnings will be Rs 7,39,629.31, and tax estimates will be 102,453.66. The amount of post-tax corpus can be Rs 8,72,175.65.
The amount of Rs 8,72,175.65 in 20 years (by 5% inflation)
Rs 3,28,713.96
The amount of Rs 8,72,175.65 in 20 years (by 6% inflation)
Rs 2,71,948.60
The amount of Rs 8,72,175.65 in 20 years (by 7% inflation)
RS 2,25,386.85
(DISCLAIM: This is not investing advice. Do your own hard work or consult an expert for financial planning.)
