How to Redeem ELSS Funds Investment ?

Learn how to redeem your ELSS funds online with this detailed step-by-step guide. Discover the tax-saving benefits, the 3-year lock-in period, and essential tips to maximize your investment returns.

While filing your income tax return for this financial year, do reflect on your tax-saving investments. Do you invest in Equity Linked Savings Scheme (ELSS)? This equity mutual fund can help you lower your income tax bill. Among all the mutual funds, this is the only type of mutual fund that makes you eligible for tax deductions under Section 80C of the Income Tax Act. 

Another advantage of investing in ELSS funds is that there is no upper cap on your investment amount. And while redeeming ELSS you need to take care of the withdrawal rules, set by the fund house.

Read below to see the steps on how to redeem ELSS funds online. 

How to Redeem ELSS Funds?

Follow the steps below to redeem your ELSS fund:

Step 1. Open the INDmoney App, go to your dashboard and click on mutual funds.

Step 2. Select the ELSS mutual fund you want to redeem.

Step 3. After selecting the fund, click on the view details button. If your ELSS has completed the three years, you will see the redeem button.

Step 4. Now, select whether you want to redeem one-time or go with a Systematic Withdrawal Plan (SWP).

Step 5. Enter the amount you want to redeem.

Step 6. Enter the OTP that you've received.

Step 8. The amount will be credited to your bank account within a few days.

What is ELSS 3-Year Lock-in Period?

ELSS full form is Equity Linked Saving Scheme, and it comes under a type of equity mutual fund that provides tax advantages. But this benefit comes at a cost, you're not allowed to redeem the fund units till the expiry of a three-year lock-in period. However, you can redeem your ELSS units after the lock-in period.

One of the first benefits that ELSS provides is the possibility of higher returns than other tax-saving products. Furthermore, you get a tax deductible up to Rs. 1.5 Lakh, which reduces the overall tax burden.

ELSS Funds' Three-Year Lock-in Benefits

• Tax Advantages: Section 80C of the Income Tax Act allows people to reduce their taxable income by investing in ELSS funds.
• Potential for Higher Returns: ELSS funds primarily invest in equities, potentially offering higher long-term returns than fixed deposits or PPF.
• Lock-in term: ELSS funds have a shorter lock-in period of three years compared to PPF (15 years) and NSC (5 years).
• LTCG: Long-term capital gains are accumulated when you invest in an ELSS fund. Plus, you don't need to pay LTCG tax on capital gains from ELSS up to Rs 1 lakh.

How to Redeem ELSS Funds Before 3 Years?

You can’t redeem ELSS funds before the three-year lock-in period. ELSS is a long-term mutual fund plan, which comes with a default 3-year lock-in. So, while investing in this equity-mutual fund, do remember that you’ll be locking in your investment for at least three years.

It means you won’t be allowed to redeem the units until the three years expire. Once the lock-in period expires, you can follow the above steps to redeem your units. Do check the exit load and other miscellaneous charges while redeeming your mutual funds to have a clear understanding of the credited amount.

Conclusion

In conclusion, premature withdrawal from an ELSS investment can have severe financial repercussions. While the option to redeem units before the three-year lock-in period exists, the potential loss of tax benefits and the treatment of the withdrawn amount as taxable income make it a decision that demands careful consideration. It is strongly recommended to consult with a financial advisor to weigh the urgency of the required funds against the long-term benefits of staying invested. A comprehensive understanding of the tax implications and the potential impact on overall investment returns is crucial before making such a decision.

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