Is it possible to liquidate ELSS Investments in full at once?
Investing in Equity Linked Saving Schemes (ELSS), tax-saving mutual funds under Section 80C of the Income Tax Act, through a Systematic Investment Plan (SIP) comes with a unique feature: each SIP installment has its own individual lock-in period of three years. This means that you cannot redeem all SIP installments at once unless they have all completed their respective three-year lock-in periods.
For instance, if you started a monthly SIP in January 2022, each installment from January 2022 to December 2022 would have its own lock-in period ending in January 2025 to December 2025, respectively. You can only redeem the units corresponding to each installment after its lock-in period has expired.
It's important to note that each SIP installment in an ELSS scheme is treated as a new investment. The lock-in period for each SIP installment is calculated from the day units are allotted for that month's installment. In the SIP route, the lock-in period for the first SIP installment ends before the lock-in period for subsequent installments.
For example, if you start a monthly SIP of Rs. 1000 ELSS Fund on 1st January 2018, the date after which you will be able to redeem the units purchased using the first installment is 2nd January 2021.
In contrast, if ELSS investments were made via the lump sum route, all units are allotted on the same day. Once the 3-year lock-in period is over, you can redeem your entire ELSS investment in one go.
In summary, when investing in ELSS through a SIP, it's crucial to understand that each installment has a separate 3-year lock-in period. You will need to wait for the lock-in period to end for each individual installment before you can redeem the units purchased using that installment. This ensures a long-term investment approach, aligning with the growth-oriented nature of ELSS funds.
In the case of ELSS investments made through a Systematic Investment Plan (SIP), it's essential to understand that each SIP installment is considered a separate investment with its individual lock-in period of three years. This means that when investing in personal-finance via mutual funds like ELSS, you cannot instantly redeem all SIP installments, but rather, you must wait for each installment's lock-in period to expire before redeeming the units purchased with that specific installment.
