ELSS Fund Redemption Process

Tax saving ELSS fund is available with 3 years lock-in period. The lock-in period in mutual funds means the investor cannot redeem the units before completing a predetermined period from the investment date. The redemption is based on the units invested.

As mentioned above, you may redeem the ELSS only after the mandatory three-year lock-in period is complete.

There are some rules to follow for redemption:

Lump-sum Investment redemption in ELSS

Suppose you have invested in the fund in a lump sum amount.  i.e., paid the money in one single payment, then the mutual funds are allotted on the same day. Therefore, all fund units are also redeemed on the same day after the closing date.

Suppose you invest a lump sum amount of Rs. 28,500 in the ELSS scheme as of 07 Feb 2019.

For your investment, let us assume you received 676.30 units. According to the ELSS lock-in period of 3 years, you cannot redeem your units for up to three years, i.e., until 7 Feb 2022. You can redeem your units or withdraw your investment only after 7 Feb 2022.

SIP Investment redemption in ELSS

Redemption becomes different if you invest in the ELSS through a SIP (Systematic Investment Plan).  As you know, the SIP investment is usually a monthly one in small increments.

If you have a SIP earmarked for ELSS funds, then each installment of SIP is considered a new investment.

As a result, each subsequent SIP installment has its three-year lock-in period. The lock-in for each SIP is considered from the day of unit allocation when that month’s SIP is debited.

E.g., if you invest Rs. 2,000 every month from Sep 2021 to Mar 2022, a total of 7 months.

So, your investment will be as follows:

Investment DateInvested AmtUnitsFree Unit After
6 Sep 20212,00019.7976 Sep 2024
5 Oct 20212,00019.5155 Oct 2024
9 Nov 20212,00019.2749 Nov 2024
6 Dec 20212,00020.3266 Dec 2024
4 Jan 20222,00019.0834 Jan 2024
4 Feb 20222,00020.1264 Feb 2024
4 Mar 20222,00021.9654 Mar 2024