ELSS Lock-in Period: How the 3 Years Count for SIPs

Every ELSS investment is locked for three years from the date its units are allotted. For a SIP, each monthly instalment buys its own units, so each instalment has its own three-year clock. Your first instalment becomes free three years after it was allotted, and the last one three years after that last allotment.

Key facts

The three-year rule

Paragraph 3(d) of the Equity Linked Savings Scheme, 2005 says the investment must be kept for at least three years from the date units are allotted. Only after that can you ask the fund to buy the units back. AMFI’s scheme categories describe ELSS the same way: at least 80% in equities, with a three-year lock-in.

Fund documents repeat the rule. The Scheme Information Document of one ELSS, for example, says redemption or switch-out is allowed “only after a period of three years” from the allotment of the units you want to redeem. During the lock-in you cannot redeem, switch to another scheme, or run a systematic withdrawal or transfer plan on those units. Units held in demat form cannot be transferred to someone else until the lock-in ends.

The clock starts on the allotment date, not the date you placed the order. If your money reaches the fund a day or two after the debit, your units, and the lock-in, date from the allotment.

How the lock-in counts for SIPs

A SIP is a series of separate purchases. Each instalment gets units at that day’s NAV and a new allotment date, so the three years run separately for each.

So a SIP that ran from April 2024 to March 2025 frees up one month’s units at a time between April 2027 and March 2028. If you stop the SIP today, the units already bought stay locked until their own dates. Stopping only ends new purchases.

Units from reinvested IDCW (dividend) payouts are a fresh allotment too, so check your fund’s Scheme Information Document for how it treats them.

Your account statement from the fund house or registrar shows free units and locked units separately. When you place a redemption, only free units are available, and funds generally redeem on a first-in, first-out basis.

Redeeming after lock-in

Nothing happens automatically at the end of three years. The units stay invested at the current NAV until you redeem, and ELSS has no maturity date. To take the money out:

1. Log in to the fund house website, the registrar’s portal or the platform you invested through.
2. Open the ELSS folio and check the free units available.
3. Choose Redeem, then enter an amount, a number of units, or “all free units”.
4. Confirm the registered bank account and authorise with the OTP.
5. Note the reference number. Requests before the cut-off get that day’s NAV.
6. Check your bank account. SEBI requires the fund to pay within three working days.

Units in a demat account are redeemed through your broker or depository participant instead. Our guide on how to redeem a mutual fund covers cut-off times and exit loads in detail.

Tax deduction and the old regime

The deduction depends on which Act and which regime apply to the year you invested.

• FY 2025-26 (return filed in 2026): Section 80C of the Income-tax Act, 1961 allows up to ₹1,50,000 a year across ELSS, PPF, life insurance and other listed items. It is not available if you are taxed under the new regime of Section 115BAC.
• Tax year 2026-27 onward: the Income-tax Act, 2025 applies. Section 123 read with paragraph 1(m) of Schedule XV covers units of a mutual fund under a scheme notified by the Central Government, with the same ₹1,50,000 cap. The new regime under Section 202 is the default and does not allow this deduction.

You claim the deduction in the year you pay. SIP instalments paid between April 2026 and March 2027 count for tax year 2026-27, even though they become free in different months of 2029 and 2030. The lock-in applies to every ELSS unit, whether or not you claim the deduction. Our ELSS tax-saving funds page covers the schemes themselves; this page covers only the lock-in. The Section 80C investments page lists the other items that share the same limit.

Tax when you redeem

An ELSS unit is always held for more than 12 months when you redeem, so the gain is long-term. Under Section 198 of the 2025 Act (Section 112A of the 1961 Act), tax is 12.5% on long-term gains above ₹1,25,000 in a year. That exemption is shared with gains from listed shares and other equity funds. Use the capital gains calculator to estimate the tax before you sell.

Death of the investor

Paragraph 3(e) of the 2005 scheme shortens the lock-in if the investor dies. The nominee or legal heir can withdraw once one year has passed from the date the units were allotted to the investor. Units allotted less than a year before the death stay locked until they turn one year old.

The claimant first gets the units transmitted into their own name. Fund houses usually ask for the death certificate, the claimant’s KYC and bank details, and, where there is no nominee, proof of legal heirship. Requirements vary by fund house and by the amount involved.

Frequently asked questions

Is the ELSS lock-in three years for SIPs too?

Yes, but it counts from each instalment’s allotment date. A SIP of 12 instalments is released over 12 months.

Can I withdraw from ELSS before three years?

No. Redemption and switch-out are allowed only after three years from allotment. The one exception is the death of the investor, where the nominee can withdraw after one year.

What happens to ELSS after the lock-in period?

The units stay invested and keep moving with the NAV. You can redeem any time, fully or in part, or hold on.

Does stopping an ELSS SIP release my money?

No. Stopping the SIP ends future purchases. Units already allotted stay locked until their own three-year dates.

Can I claim the ELSS deduction under the new tax regime?

No. The deduction is available only if you choose the old regime for that year.

Is ELSS redemption taxable?

Yes. Long-term gains above ₹1,25,000 a year from equity funds and listed shares combined are taxed at 12.5%.

Can I switch from one ELSS to another during lock-in?

No. A switch is treated as a redemption, so it is allowed only for units that have completed three years.

Sources

• Equity Linked Savings Scheme, 2005, Notification No. 226 — Income Tax Department (checked 16 Sep 2026)
• Categorisation of mutual fund schemes — AMFI (checked 16 Sep 2026)
• A guide to ELSS — SEBI Investor website (checked 16 Sep 2026)
• Scheme Information Document, NJ ELSS Tax Saver Scheme — hosted by AMFI (checked 16 Sep 2026)
• FAQs on mutual funds — SEBI (checked 16 Sep 2026)
• Income-tax Act, 2025 as amended by the Finance Act, 2026 (Sections 123, 198, 202; Schedule XV) — Income Tax Department (checked 16 Sep 2026)
• Salaried individuals for AY 2026-27 — Income Tax Department e-Filing portal (checked 16 Sep 2026)