Language

Call us

/content/dam/tataaialifeinsurancecompanylimited/navigations/new-call-us/Close.png

starFOR EXISTING POLICY

Have query on premium, payout or any servicing need?

Dedicated NRI Helpdesk:

Call Icon +91 22 6251 9966

Monday - Saturday | 10 am - 7 pm IST
Call charges apply

Plus IconFOR NEW POLICY

Want to buy a new policy online?

For Indian Residents

Call Icon +91 22 6984 9300

Give missed call for a call back:

Call Icon +91 11 6615 8748

Monday - Sunday | 8 am - 11 pm IST

Exclusively for NRIs

Initiate Internet Call

Data charges may apply

Give missed call for a call back:

call +91 11 4473 0242

Available All Days | 24 x 7

Back Arrow Icon
Close Button
Back Arrow Icon
Close Button

Need assistance in choosing the right insurance plan? Get a call from our Expert.

Need assistance in choosing the right insurance plan?Get a call from our Expert.

+91 dropdown arrow

Select Plan dropdown arrow
  • Term plans
  • Saving plans
  • Wealth plans
  • Retirement plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in. T&C apply.

ELSS Fund Lock-in Period: The Complete Guide

ELSS funds are a true representation of the power patience holds in the investment sector. The Equity Linked Savings Scheme funds offer the ultimate solution for achieving the dual objective of growing your wealth and saving on taxes.
 

The lock-in period of the ELSS fund is its distinctive feature that encourages a disciplined investment approach. This lock-in period is where you fix your invested amount for a specific time. It comprises some complexities, and you must grasp its concept.


This complete guide on the ELSS fund's lock-in period will cover its important aspects, duration, benefits, and how it can influence your investment strategy. So, let's get started!

ELSS Lock-In Period Duration

The lock-in period is crucial to distinguishing the ELSS fund from other mutual funds. Often, investors are focused on the attractive tax benefits the fund offers and tend to overlook the significance of the lock-in period.

 

The lock-in period is the mandatory duration during which the investors are prohibited from withdrawing their investment. But how long does it take?

 

Compared to the other tax-saving investment, the lock-in period for ELSS funds are shorter. The Securities and Exchange Board of India (SEBI) has set the period to be three years. Hence, you cannot liquidate your fund's total amount for at least three years as an investor.

 

However, the three-year term was not chosen randomly; it was a strategic step taken by SEBI. The objective was to encourage long-term investment through a reasonable and flexible approach.

 

Even though the ELSS fund's lock-in period prevents investors from fully withdrawing the fund, it has opened up a gap where you could make partial redemptions after completing the lock-in period, where you can withdraw a partial amount.

 

Hence, apart from focusing on the tax benefits of ELSS funds, evaluate the lock-in period feature and align your investment goals with it. While liquidity is restricted in the ELSS lock-in period, it provides stability for optimizing your investments.
 

Benefits of the Lock-in Period in ELSS Fund.

Though you may feel that the lock-in period makes you lose control over your money and feel handicapped in case of market risk times, it has substantial benefits. Let us see what benefits you can avail from the lock-in period of the ELSS fund.
 



  • Encouraging Long-Term Investing

Since the ability to redeem the funds is limited, it prevents an individual from frequent buying and selling. Which, in return, helps investors stay committed to their financial goals and reject short-term market fluctuations.
 

  • Tax Benefit

Certain specific tax benefits are associated with the best ELSS funds under Section 80C of the Indian Tax Act, by which you can avail up to ₹ 1.5 lakhs. However, you can avail of the ELSS tax benefits only after being invested in the fund without partial withdrawals.
 

  • Potential For Higher Returns

Since ELSS funds invest in equity-related instruments, the lock-in period ensures that you are exposed to the market's potential growth rather than being influenced by short-term market movements. This helps you make a well-informed decision, leading to better, higher returns in the long run.
 

  • Detect Speculative Behaviour

The lock-in period of the ELSS fund ensures that short-term speculations do not influence an investor but take a responsive approach focusing on long-term wealth creation and tax efficiency.
 

  • Diversification Opportunities

The ELSS lock-in period allows the investment manager to explore different stocks based on their long-term growth prospects. It diversifies your equities across various sectors.

These were a few benefits that you can expect from a lock-in period associated with ELSS funds.
 

How Does the Lock-in Period Affect ELSS Fund Performance?

Being such a significant part of the ELSS fund, it is evident that the lock-in period affects and impacts its performance on multiple levels. As an investor, your primary goal is to get maximum returns and optimize your wealth creation.

 

Here is how the lock-in period affects the best ELSS fund's performance:

  • The longer investment horizon allows you to make strategic investment decisions.

 

  • The locked-in period reduces portfolio churn; investors are not forced to sell off assets, preventing investment strategy disruption.

 

  • It reduces transactional activities, leading to a lower expense ratio than open-ended mutual funds.

 

  • The lock-in period of ELSS funds opens the potential for compounding your money since the investments' gains are reinvested over and over, boosting the overall fund performance.

 

  • Since ELSS funds are locked in for a longer time, they have a low impact on market volatility and dodge any short-term fluctuations in the market.

 

These were some of the positive effects of the lock-in period that you might experience in your ELSS fund's performance. Additionally, the lock-in period has a significant impact on the ELSS tax benefits as well.

 

Conclusion
 

In conclusion, the lock-in period in ELSS is an important element in the landscape of tax-saving investments.

 

Even though the locked-in window seems like a major restriction for investors, we should not overlook the fact that it paves the way for a disciplined investment habit.
 

ELSS funds do not just serve the aspect of tax saving but work towards the potential growth of your assets, capitalizing more for you.

 

Moreover, you can treat the ELSS lock-in period as an opportunity to enhance your investment strategies and leverage the power of the lock-in period to become financially secure.

 

Discover Tailored Financial Planning Solutions to Secure your Future

+91 dropdown arrow
  • +93 Afghanistan

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in.


 

Looking to buy a new insurance plan?

Our experts are happy to help you!

+91

Select plan
  • Term plans
  • Saving plans
  • Retirement plans
  • Wealth plans
  • I don't know/I need help

TATA AIA Life Insurance Co. Ltd will send you updates on your policy, new products & services, insurance solutions or related information. Select here to opt-in

People Like You Also Read

How Can I Earn Rs.100 Per Day?
Read More
Pravasi Pension Scheme For NRIs: Eligibility and Application Procedure
Read More
How to Calculate the Term Plan Premium Amount?
Read More
5 Differences You Must Know Between Savings and Investments
Read More
Get Protection, Investment & Savings With Combo Insurance Plans | Tata AIA Blog
Read More
Are You An Ant or Grasshopper? Money Savings Lesson
Read More
4 Reasons Why Combining Protection with Savings Work
Read More
Investing in a Savings Plan? Here are 5 Critical Things to Consider
Read More
Goal Oriented Savings: Achieve Your Goals with Timely Savings
Read More
How To Inculcate the Value Of Saving In Your Children?
Read More

People Like You Also Read

How Can I Earn Rs.100 Per Day?
Read More
Pravasi Pension Scheme For NRIs: Eligibility and Application Procedure
Read More
How to Calculate the Term Plan Premium Amount?
Read More
5 Differences You Must Know Between Savings and Investments
Read More
Get Protection, Investment & Savings With Combo Insurance Plans | Tata AIA Blog
Read More
Are You An Ant or Grasshopper? Money Savings Lesson
Read More
4 Reasons Why Combining Protection with Savings Work
Read More
Investing in a Savings Plan? Here are 5 Critical Things to Consider
Read More
Goal Oriented Savings: Achieve Your Goals with Timely Savings
Read More
How To Inculcate the Value Of Saving In Your Children?
Read More
Website Logo Image Icon

Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

View all posts by Tata AIA Life Insurance

Frequently Asked Questions

Are ELSS Funds Taxable After The Lock-In Period?

Yes, the ELSS funds are subjected to taxation once the three years lock-in period is over. Hence, according to LTCG tax laws, your gains (more than ₹100000) from the investment are taxed at the rate of 10%

Can I Continue Investing In ELSS Funds After The Lock-In Period?

You can stay invested in ELSS funds once the lock-in period ends. You can redeem your earnings, switch to other ELSS schemes, or continue the SIP.

Can I Switch Between Different ELSS Funds Within The Lock-In Period?

You cannot switch between different ELSS funds within the lock-in period. The lock-in period is a mandatory regulatory requirement the government sets. Hence, you cannot transfer your investments to another scheme, even within ELSS funds.