ELSS has the shortest lock-in among popular tax-saving options, but for SIP investors the three years run separately for every instalment.
Equity Linked Savings Schemes (ELSS) are diversified equity mutual funds that qualify for a deduction under the old tax regime, within the overall ₹1.5 lakh limit popularly known as the Section 80C limit. In exchange, your units are locked in for three years.
The lock-in, instalment by instalment
If you invest a lump sum on 1 April 2026, all those units become free to redeem on 1 April 2029. With a SIP it is different: each monthly instalment is locked for three years from its own date.
| SIP instalment | Units free from |
|---|---|
| 5 April 2026 | 5 April 2029 |
| 5 May 2026 | 5 May 2029 |
| 5 March 2027 | 5 March 2030 |
So a SIP started today will not be fully free for three years after your last instalment.
Old regime or new regime?
The ELSS deduction is available only if you file under the old tax regime. Under the new regime, ELSS is simply an equity fund with a lock-in. Before investing for tax reasons, check which regime you plan to choose this year.
Tax rules change and depend on your situation. Please confirm with your tax consultant before acting.
Common mistakes
- Investing in March in a hurry, without reading the scheme documents.
- Assuming gains are tax-free. Redemptions are taxed as equity capital gains.
- Forgetting that the deduction limit is shared with EPF, life insurance premiums, home-loan principal and tuition fees.
This article is for general information and education only. It is not investment, tax or legal advice, nor a recommendation of any scheme or product. Mutual fund investments are subject to market risks; read all scheme related documents carefully.
