Understanding ELSS lock in period for various schemes

(Last Updated On: April 1, 2017)

Equity link schemes are mutual fund schemes that qualify for tax saving investment under the limit of Rs.1.5 Lakh under section 80 C of Income tax and is considered as one of the best ways to utilise their investment limit by not only saving tax but also through achieving their financial goals. This blog looks into ELSS lock in period for the ELSS schemes.

ELSS mutual funds scheme mostly invest 65% in equity related instruments.  ELSS comes with 3-year lock-in period and its returns are tax-free. So while investing in it; one will not only save tax but its returns are also tax-free. Hence it is considered as one of the best ways of saving tax with achieving financial goals. The returns in ELSS are substantially higher as compared to PPF or ULIP.

ELSS lock-in period

ELSS comes with the lock-in period of 3 years. One cannot withdraw funds during the period of 3 years from the date of purchase. When the amount is invested through SIP mode then each individual SIP carries a lock-in period of 3 years from the date of purchase. One can remain invested even after 3 years with contributions or without contributions.

Tax benefit through ELSS

When one invest in Fixed deposit or Public Provident Fund account, the returns are taxed on yearly basis. While in the case of ELSS, the taxation comes into picture only when the units of ELSS funds are sold. When units are sold within 3 years from the date of investment, the gain is called short-term capital gain and it will be taxed at respective tax slab of an individual. While if units are sold after 3 years from the date of purchase, the gain is called long-term capital gain and is taxed at a flat rate of 20% with inflation index benefit.


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