Tax savings funds are a great thing to have - but there are a few technicalities you may need some clarity on. We’re breaking them down for you.
3 years is the lowest lock-in period for MFs. It applies to the units of the MF you purchased when you invested in that tax-saving MF.
They can be withdrawn when the units complete 3 years, irrespective of their value at the time of redemption.
Let’s say you invested Rs 50k in a tax-saving MF in Dec 2016, and it got you 1000 units at a price of Rs. 50 per unit (NAV).
Those units get locked-in for 3 years, and will be “freed” in Dec 2019, and you can withdraw them on any date after that.
If you have invested as a SIP or in instalments, each instalment is treated as a separate investment and will have its own lock-in period of 3 years -
which means you can withdraw those units bit by bit, month on month.
ELSS or tax-saving mutual funds are for all practical purposes equity mutual funds and should be considered for the long term.
Withdrawing them after 3 years isn’t the best approach - give them at least 7 years to get the most benefit!
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.