# ELSS withdrawal rules: what happens when your lock-in ends

Source: https://koshex.com/blog/your-elss-lock-in-period-is-over-whats-next · Published 14 August 2026 · 9 min read

You can withdraw an ELSS unit three years after the date it was allotted to you, and not before, unless the investor has died. With a SIP, each instalment has its own three-year clock. When a lock-in ends, nothing happens by itself: the units stay invested until you sell them, and any gain is a long-term capital gain.

## Key takeaways

- An ELSS unit can be withdrawn three years after its allotment date. The only exception is the investor's death, when a nominee or legal heir may withdraw after one year.
- Each SIP instalment has its own three-year lock-in, counted from the allotment date on your statement.
- Nothing happens automatically when a lock-in ends. The units stay invested until you redeem or switch them.
- ELSS gains are long term. With securities transaction tax paid on the sale, tax is 12.5% on the part of a tax year's gains above ₹1,25,000. This applies to long-term gains on equity-oriented fund units.
- New ELSS units, including units bought by a switch, start their own three-year lock-in.

You can withdraw an ELSS unit three years after the date it was allotted to you, and not a day before, unless the investor has died. With a SIP, each instalment has its own three-year clock, so units come free one month at a time. When a unit's lock-in ends, nothing happens by itself: it stays invested until you sell it, and any gain is taxed as a long-term capital gain.

ELSS stands for equity linked savings scheme. It is a mutual fund that keeps at least 80% of its money in equity, meaning company shares. It also qualifies for the tax deduction under section 123 (the old Section 80C), under the old tax regime only.

## What are the ELSS withdrawal rules?

Each ELSS unit can be withdrawn only after three years from the date it was allotted to you. The allotment date is the date your statement shows the unit was given to you.

Lock-in means a period during which you cannot sell at all. For what the ELSS lock-in is and why it exists, read the [ELSS funds page](https://koshex.com/mutual-funds/categories/elss-funds).

The rules in short:

- **Before three years:** no withdrawal. The one exception is the investor's death, when the nominee or legal heir may withdraw after one year from allotment. [How to claim mutual fund investments after the death of an investor](https://koshex.com/blog/how-to-claim-mutual-fund-investments-after-death-of-investor) covers that route.
- **During the lock-in:** ELSS units can't be switched out during their three-year lock-in, just as they can't be sold. One ELSS scheme document says the same for pledging. [Loans against mutual funds](https://koshex.com/blog/get-loan-against-mutual-funds) explains how pledging works.
- **After the lock-in:** nothing happens automatically. The same document describes an open-ended scheme, so units stay invested and can be redeemed or switched out on any business day at the applicable NAV. NAV is the price of one unit.

Open-ended means the scheme offers units for sale without a fixed date by which you must redeem them. That is why the money stays put when the lock-in ends.

## When can you withdraw each SIP instalment?

Each SIP instalment is a separate purchase, so each is locked for three years from its own allotment date. The scheme's rules do not mention SIPs. This follows from counting the three years from the allotment of units.

Here is an example. Say you put ₹10,000 into an ELSS SIP on the 5th of every month, from April 2023 to March 2024. That is twelve instalments, ₹1,20,000 in all.

| Instalment month | Allotment date (5th, or next business day) | Free to withdraw from |
| --- | --- | --- |
| April 2023 | 5 April 2023 | 5 April 2026 |
| May 2023 | 5 May 2023 | 5 May 2026 |
| June 2023 | 5 June 2023 | 5 June 2026 |
| July 2023 | 5 July 2023 | 5 July 2026 |
| August 2023 | 7 August 2023 | 7 August 2026 |
| September 2023 | 5 September 2023 | 5 September 2026 |
| October 2023 | 5 October 2023 | 5 October 2026 |
| November 2023 | 6 November 2023 | 6 November 2026 |
| December 2023 | 5 December 2023 | 5 December 2026 |
| January 2024 | 5 January 2024 | 5 January 2027 |
| February 2024 | 5 February 2024 | 5 February 2027 |
| March 2024 | 5 March 2024 | 5 March 2027 |

By the end of September 2026, six instalments (₹60,000 invested) can be withdrawn and six (₹60,000) are still locked. One more comes free each month until March 2027.

Count from the allotment date on your statement, not from the SIP date. One scheme document says an instalment falling on a non-business day is processed on the next business day. So your allotment may come a day or two after the 5th, and the date you can withdraw moves with it.

## How do you redeem ELSS units?

You redeem ELSS units the way you redeem any mutual fund units: through the platform you invested on, or through MF Central. MF Central lets investors across all fund houses make purchase, redemption and switch requests. Koshex customers can redeem (sell) units on Koshex.

For the steps, see [how to sell mutual funds online](https://koshex.com/blog/how-to-sell-mutual-funds-online-a-step-by-step-guide).

A few points are specific to ELSS:

- **Oldest units go first.** Some scheme documents say redemption is done on a first in, first out (FIFO) basis. If your fund works this way, a part-redemption sells your oldest units first. Those are also the first to come out of lock-in.
- **Money is sent within 3 working days.** SEBI's rule is that redemption proceeds must be transferred to the unitholder within 3 working days of the redemption date.
- **Exit load is usually nil.** Exit load is a fee some funds charge if you sell within a set time. ELSS funds usually charge no exit load. One ELSS scheme document lists it as nil and repeats the three-year lock-in. Check the scheme information document of your own fund.

## Is ELSS withdrawal tax-free after three years?

No. Withdrawing after three years is not tax-free, because the gain is a long-term capital gain. That is the profit on units sold after the holding period line. Holding period is how long you have owned a unit. For equity-oriented funds the line is 12 months.

ELSS gains are always long term, since the lock-in is longer than 12 months. The one exception is a nominee or legal heir who redeems after one year.

For 2026-27, under the Income-tax Act, 2025, long-term gains on equity-oriented fund units are taxed at 12.5% on the part above ₹1,25,000 a year. This applies when securities transaction tax (STT), a tax charged on the sale itself, is paid on the sale. Health and Education Cess, an extra 4% of the tax, is added on top. A surcharge, an extra charge on the tax once total income passes ₹50 lakh, can apply too. On capital gains it is capped at 15%.

The ₹1,25,000 is one allowance per person per tax year. It is not per fund or per fund house. It also covers gains from listed shares and other equity-oriented fund units sold in the same year.

Here is an example with an assumed gain. Say you redeem ELSS units in one tax year with a long-term gain of ₹1,45,000, and you sold no other shares or equity fund units that year. Your total income is not above ₹50 lakh, so no surcharge applies, and STT was paid on the sale.

- The first ₹1,25,000 of the gain is not taxed.
- Tax is 12.5% of the remaining ₹20,000, which is ₹2,500.
- Cess of 4% adds ₹100, so the total is ₹2,600.

No TDS (tax deducted at source) is cut when a resident redeems, so the gain goes into your tax return. The deduction you claimed when you invested does not change this. For gains spread across SIP instalments, see [how SIP returns are taxed](https://koshex.com/blog/how-sip-returns-are-taxed).

## Your lock-in is over: what are your choices?

When a lock-in ends you have three choices: keep the units, redeem them, or put money into an ELSS again. Each depends on different things, and the choice is yours.

### Keep the units

Keeping is the default, because nothing happens by itself. The three-year restriction no longer applies, but the fund is still an ELSS and still keeps at least 80% in equity. The factors are the date you will need the money, and how much equity you already hold elsewhere.

### Redeem

Redeeming turns the units into cash, so the factors are what the money is for and the tax this year. Gains from this sale share the one ₹1,25,000 allowance with any other equity sales in the same tax year. [When should you sell a mutual fund](https://koshex.com/blog/when-should-you-sell-a-mutual-fund) lays out the wider reasons people sell.

### Put money into an ELSS again

Fresh ELSS investment matters for the tax deduction. Section 123 allows a deduction of up to ₹1,50,000 in a tax year, in the old tax regime only. That cap covers all the items listed in Schedule XV together. An ELSS subscription is one of those items. The deduction is not available under the default tax regime. [PPF, ELSS and NPS compared](https://koshex.com/blog/which-one-is-better-for-tax-saving-ppf-elss-vs-nps) shows the other items, and [the new tax regime](https://koshex.com/blog/features-of-the-new-tax-regime-and-its-benefits) explains why the regime matters here.

A few points apply if you reinvest:

- New ELSS units start their own three-year lock-in from their allotment date, however you buy them.
- A switch from one scheme to another is a sale of the old units and a purchase of the new ones. The new units' holding period starts on the switch date, and ELSS units bought by a switch have their own allotment date and their own three-year lock-in from it. [How to switch mutual fund schemes](https://koshex.com/blog/how-to-switch-mutual-fund-schemes) covers switching in full.
- Whether a switch into an ELSS counts for the section 123 deduction is not spelled out in the Act. Check with the fund house or a tax adviser before relying on it.

Koshex customers can switch between schemes of the same fund house on Koshex. Koshex also helps with the ELSS / section 123 decision each financial year.

## Do other mutual funds have a lock-in?

Most open-ended funds have no lock-in. ELSS is an exception, with three years from allotment. Open-ended funds sell units without a fixed end date, and some charge an exit load instead. An exit load is a fee for selling within a set time, and an open-ended scheme's exit load may not exceed 3% of NAV. A lock-in stops you selling at all; an exit load only charges you if you do.

A close-ended fund is different. It has a set maturity date. Its units can't be sold back to the fund house before maturity, but they are listed on a stock exchange, where you may be able to sell them to another investor.

See [open-ended funds](https://koshex.com/blog/what-are-open-ended-mutual-funds-benefits-risks-and-how-they-work) for the types and [exit load in mutual funds](https://koshex.com/blog/exit-load-in-mutual-funds) for the fee on selling early.

## Frequently asked questions

### When can I withdraw from my ELSS fund?

You can withdraw an ELSS unit three years after the date it was allotted to you, and not before, unless the investor has died. For a SIP, each instalment is counted from its own allotment date. The date is on your statement, and it may fall a day or two after the SIP date.

### Do I have to redeem my ELSS when the lock-in ends?

No. Once a lock-in ends, nothing happens by itself. The scheme is open-ended, so the units stay invested until you redeem or switch them out.

### Can I withdraw ELSS units before three years in an emergency?

No. The ELSS scheme rules set a minimum of three years from the date of allotment. The one exception is the investor's death, when the nominee or legal heir may withdraw after one year from allotment.

### Is tax deducted when I redeem ELSS units?

No TDS is deducted on a resident's redemption gains. The gain is still taxable, and you report it in your tax return. It is a long-term gain on equity-oriented fund units. With securities transaction tax paid on the sale, it is taxed at 12.5% on the part of the year's long-term gains above ₹1,25,000.

### Can I switch my ELSS units to another fund after the lock-in?

Yes, after the lock-in but not during it. A switch counts as a sale of the old units and a purchase of the new ones, and new ELSS units start a fresh lock-in. Whether a switched amount counts for the section 123 deduction is not spelled out in the Act. Check with the fund house or a tax adviser.

### Can I use ELSS units for a loan?

Not while they are locked in. One ELSS scheme document says units cannot be pledged until three years from allotment are complete. One fund house's pledge facility leaves out its ELSS fund during the lock-in. After the lock-in, ask the lender whether it accepts them.

### Is there an exit load on ELSS after the lock-in?

ELSS funds usually charge no exit load. One ELSS scheme document lists the exit load as nil. Check the scheme information document of your own fund.

*This article explains how things work; it is not advice to buy or sell any investment. Mutual fund investments are subject to market risks, read all scheme related documents carefully.*