ELSS (Equity Linked Savings Scheme) investments have a mandatory 3-year lock-in period — each SIP instalment must be held for 3 years from its date of investment.
ELSS funds provide a deduction under Section 80C of the Income Tax Act (up to ₹1.5 lakh per financial year). In exchange for this tax benefit, investments are locked in for 3 years. The lock-in applies individually to each investment: if you start a SIP in January 2024, the January instalment unlocks in January 2027, February unlocks in February 2027, and so on. You cannot redeem locked units — only unlocked ones. This 3-year lock-in is actually the shortest among all Section 80C options (PPF: 15 years, NSC: 5 years, tax-saving FD: 5 years).
ELSS gives you ₹1.5 lakh of Section 80C deduction — saving ₹15,000–₹46,800 in taxes depending on your bracket. The price: your money is locked for 3 years. Unlike PPF (15-year lock-in) or NSC (5-year), ELSS's 3 years is comparatively short. And since ELSS is equity, the 3-year holding typically results in LTCG treatment when you do redeem. For SIP investors, the lock-in is rolling — each instalment has its own 3-year calendar.
₹1.5 lakh annual investment qualifies for Section 80C deduction.
Each unit purchased has a 3-year lock-in from purchase date.
SIP instalments: January 2024 instalment unlocks January 2027; February 2024 unlocks February 2027.
After 3 years, gains are taxed as LTCG at 12.5% (above ₹1.25 lakh) — equity tax treatment.
Post lock-in, ELSS continues as a regular equity fund — no obligation to redeem.