What Should You Do To Your ELSS Fund After 3 Years Lock-In Period? (2024)

FAQs

What Should You Do To Your ELSS Fund After 3 Years Lock-In Period? ›

What to Do After the Lock-in Ends? While there is a mandatory lock-in of three years, you don't have to mandatorily redeem the units once the lock-in period is over. After the end of the lock-in period, the fund becomes a diversified, open-ended equity-oriented scheme. You can redeem the units whenever you want.

You can redeem all your ELSS units in one go after 3 years, that is, on 11th September 2025 when the lock-in period ends. You can redeem your ELSS lump sum investments in two ways. One, you can raise a request online, by login into the mutual fund website and raising a redemption request.

The lock-in period in ELSS refers to the three years from the date of investment when you can't withdraw your money. In other words, you can redeem your ELSS investment only after three years. Each SIP is locked in for three years if you make an ELSS investment through the SIP.

In simple terms, it can be said as the period that the investor cannot withdraw his funds. As the ELSS comes with a lock-in of 3 years, it means that a user can withdraw the funds only after 3 years to avail tax saving options. It also allows a user to continue his investment or withdraw it after the lock-in period.

You need to keep in mind that once the lock-in period of your ELSS or any other scheme expires, the fund becomes an open-ended scheme. Once this happens, you can withdraw money from your scheme at any point of time.

All ELSS funds have a lock-in period of three years. Once the lock-in period ends for a particular instalment/lump sum investment, the ELSS becomes an open-ended equity-oriented investment scheme with full liquidity.

What are the Disadvantages of ELSS Funds? High risk ELSS Funds: ELSS mutual funds have a huge exposure to equity markets. Equity related instruments are highly susceptible to market volatility. Hence, due to this ELSS mutual funds carry high risk.

ELSS funds are a good option for investors with a long-term investment horizon looking to seek exposure to the stock markets and save taxes. There are various ELSS funds available. Research your options and ensure that you choose a fund that syncs with your financial plan while helping you reduce your tax liability.

Here we would discuss one of the best tax saving options: tax saving or tax planning mutual funds or Equity Linked Saving Schemes (ELSS) that have offered investors around 13.35% returns over a long period of 10 years. For late comers, you can save income taxes of up to Rs 1.5 lakh in a financial year.

If this analysis is done for 15 years, the odds even further become favorable. History shows 3 years is like playing dice. You can have good returns, but there are also chances of an investor making low to negative returns hence don't invest in an ELSS if your time horizon is 3 years. Invest for the Long term.

Is ELSS proof for income tax? ›

Your employer will already have details of your EPF contributions. However if asked, you can submit a print-out of your EPF passbook. ELSS Mutual Funds: Investment in ELSS or tax-saving funds gets a tax deduction up to Rs 1.5 lakh under Section 80C of the Income Tax Act, 1961.

Should you invest in multiple ELSS funds? You may consider investing in two or three ELSS funds. However, you may avoid investing in multiple ELSS funds as you could struggle to monitor your investment. You may avoid investing in five or six ELSS funds as it may result in an overlap of your portfolio.

ELSS is a tax-saving mutual fund that helps you to save taxes on your investments. At the same time, it provides higher returns than FDs since returns are market-linked. You can claim up to Rs 1,50,000 deduction per annum on your income under Section 80C of the Income Tax Act when you invest in ELSS.

Many financial wizards believe it is a great idea to sell ELSS investments as soon as the lock-in period is over and invest the money again in an ELSS to claim the tax benefits under section 80C. As you know your investments in an ELSS qualifies for a tax deduction of up to Rs 1.5 lakh in a financial year.

You can decide to continue your investment as an open-ended fund after the expiry of the lock-in period of mutual funds. Besides, you can transfer the money to any other scheme that matches your investment objectives. However, you must only continue if the fund's performance aligns with your investment objectives.

However, if a mutual fund is consistently underperforming and failing to meet its objectives, it may be time to reconsider the investment. Before making a decision to exit a mutual fund, investors should evaluate their financial goals, risk tolerance, and investment time horizon.

In this article, we compared and contrasted ELSS versus PPF on several parameters. Both PPF and ELSS are very tax friendly investments. Though ELSS investments are subject to market risks, they offer superior wealth creation potential and more liquidity compared to PPF.

Here we would discuss one of the best tax saving options: tax saving or tax planning mutual funds or Equity Linked Saving Schemes (ELSS) that have offered investors around 13.35% returns over a long period of 10 years. For late comers, you can save income taxes of up to Rs 1.5 lakh in a financial year.

Risks of ELSS

These funds do not offer guaranteed returns as they are high-risk-return investments investing in market-linked instruments and depending on the performance of underlying securities. However, if invested for the long term, they can beat market instability to offer good returns to the investors.

Do I need to invest every year in ELSS? ›

Periodic investment is a great solution. For salaried investors, it will also help to balance out their monthly income rather than investing lumpsum in ELSS funds. Other than being a great tax-saving investment, ELSS has a minimum lock-in period of 3 years as compared to 5 or more years for other tax-saving options.

You can definitely invest in more than one ELSS. The only thing to remember is that you can only save upto Rs 1.5 lakh under section 80C. If you are already saving 1.5 lakh, you can choose another equity scheme rather than going for another ELSS. Invest in ELSS only if you want to save taxes.

Mutual fund advisors say that the primary reason for the muted performance of ELSSs over the last one year is their high inclination towards large cap stocks and growth strategy.

“Ideally, a taxpayer should start an SIP in an ELSS fund from April through the whole financial year so that he does not get worried by the volatility,” says Raj Khosla, Managing Director of MyMoneyMantra.com. Don't be guided by the short-term performance of a scheme. Look at the long term record before investing.

Investments made in an ELSS fund are eligible for tax benefits under Section 80C of the Income Tax Act. While there is no upper limit to the amount that can be invested, a maximum of Rs. 1.5 lakh is eligible for a tax deduction as per the Income Tax rules.

You can invest in ELSS the same way that you invest in any Mutual Fund. The easiest way is through an Online Investment Services Account. You can invest either as a lump sum or via the SIP (systematic investment plan) route.

How do I show ELSS on my tax return? ›

Equity Linked Savings Scheme and Public Provident Fund are savings schemes for tax benefits. As an investor, you can invest in either of the schemes or both.

How do I invest in ELSS? You don't need a demat account to invest in a mutual fund. You can buy mutual funds, including Equity Linked Savings Schemes (ELSS), through an AMFI-certified mutual fund advisor or directly through a fund house's website.

While there is no upper limit to the amount that can be invested, a maximum of Rs. 1.5 lakh is eligible for a tax deduction as per the IT Act. By investing this amount in an ELSS, one can save up to ₹46,800 a year in tax outgo.

If you invest in an ELSS mutual fund scheme, you may or may not choose to obtain a dividend from your investment. If you select the dividend payout option, you qualify to receive it if the fund declares any. You may gain a dividend even during the 3-year lock-in period.

If you are an investor with a small but regular amount of money available for investment, SIPs can be a more suitable investment option. For investors with a relatively high investment amount and risk tolerance, lump-sum investments may be more beneficial.

ULIPs are comparatively less risky than ELSS because the policy coverage is guaranteed even if the fund returns are not. Also, the ULIP can have equity, debt, or hybrid fund units that also decide the risk factor of the ULIPs.

As you may already know, ELSS funds invest in equity and, if held for the long term, can prove to be more rewarding as compared to other 80C options. Financial experts advise investing in these funds through SIPs throughout the year.

An equity-linked savings scheme or ELSS is a tax-saving investment under Section 80C of the Income Tax Act, 1961. By investing in ELSS, you can claim a tax rebate of up to Rs 1,50,000 a year and save up to Rs 46,800 a year in taxes. An ELSS is the only kind of mutual fund eligible for tax benefits under Section 80C.

While other funds allow you to take a loan against securities, this option is not available with ELSS funds. To reiterate, ELSS or equity linked savings scheme, also known as tax saver mutual funds, have a mandatory lock-in period of three years counted from the date of unit allocation.

Can I stop SIP after 3 years? ›

You may cancel SIP even if you have invested through a mutual fund distributor. It helps if you inform your mutual fund agent who fills up the cancellation request for the SIP with the respective AMC.

Any amount already invested in the fund will continue to remain invested. Canceling the SIP will only stop future installments. You may redeem the invested amount via your Mutual Funds dashboard.

Yes. Unlike fixed deposits (FD) and recurring deposits (RD), you can stop an SIP any time you want. After stopping paying for an SIP plan, you can either choose to redeem your money from the mutual fund or continue to remain invested in the fund.

The 90/10 rule in investing is a comment made by Warren Buffett regarding asset allocation. The rule stipulates investing 90% of one's investment capital towards low-cost stock-based index funds and the remainder 10% to short-term government bonds.

Yes, we are talking about debt mutual funds here, not equity mutual funds. Debt mutual funds are likely to offer better returns in 2023. They will offer even higher returns when the RBI starts cutting interest rates.

Hold Funds in a Retirement Account

The easiest way to manage any form of capital gains tax is to hold your investments in a qualified retirement account. As a general rule, the IRS does not consider the sale or management of these assets a tax event until you make a withdrawal from the account.

ELSS is subject to a three year lock-in. If an investor dies, the nominees can withdraw the money before completion of the lock-in, provided a year has passed since allotment. PPF accounts are subject to a lock-in of 15 years.

You will need the folio number, bank account number connected with the folio, and PAN as login credentials for the website. You can also cancel it through mobile applications of the respective AMCs. Next, you need to choose the ongoing SIP that you wish to terminate and click 'Cancel SIP.

Unfortunately, there is no option to withdraw your ELSS investment before the lock-in period of three years. While other funds allow you to take a loan against securities, this option is not available with ELSS funds.

Yes, in the case of unfortunate passing away of the original unitholder, the nominee or legal heir can redeem the ELSS fund units after one year from the date of allotment of units to the deceased unitholder. This means that the nominee/legal heir needn't wait for the full lock-in period of three years.

Can ELSS be transferred? ›

The only way to transfer ELSS mutual funds under lock-in from one demat to another is via closure cum transfer. The locked in units can only be moved to another demat account of the same account holder. If the ELSS scheme is out of the lock-in period or has free units, it can be transferred without any restrictions.

You can have good returns, but there are also chances of an investor making low to negative returns hence don't invest in an ELSS if your time horizon is 3 years. Invest for the Long term.

You may consider pausing SIPs if you have insufficient funds for your daily needs. However, it's advisable to maintain at least three months worth of SIPs in your emergency fund to ensure the continuance of investment to attain long term financial goals.

2. Mutual funds do not penalise for missing an SIP instalment. 3. However, the bank will charge you a penalty for the insufficient funds and missing the auto-debit payment.

A patient investment in SIP in this particular fund for 20-25 years could help take you closer to your financial goals after retirement.

You can definitely invest in more than one ELSS. The only thing to remember is that you can only save upto Rs 1.5 lakh under section 80C. If you are already saving 1.5 lakh, you can choose another equity scheme rather than going for another ELSS. Invest in ELSS only if you want to save taxes.

1 lakh a year from ELSS mutual funds are exempt from income tax and long-term capital gains above Rs. 1 lakh are taxed at 10%. Corpus generated out of ELSS investment can also be used to fulfil your financial goals.