Money is a big deal in our lives. It can be scary to start investing, but some investments can make you more money and also save you on taxes. One of these is ELSS. It is a tax-saving mutual fund with a three-year lock-in period. Now let us see how to withdraw ELSS before 3 years;
What is ELSS?
ELSS (Equity Linked Saving Scheme), is a mutual fund program in India that helps you save on taxes under Section 80C of the Income Tax Act. These funds mainly invest in stocks and equity-related securities. So, they are a good option for saving taxes while also investing in the stock market.
ELSS funds have a three-year lock-in period. This means you can’t take out your money for three years after investing. However, once this time is up, you have the option to redeem your ELSS units. So, while you can’t access your money right away, you do have the flexibility to withdraw it later on.
ELSS funds can give you bigger returns than other tax-saving options like fixed deposits or regular insurance policies. Moreover, when you invest in ELSS funds, you can deduct a certain amount from your taxable income. This helps you pay less tax. So, investing in ELSS funds not only offers the potential for higher returns but also helps you save on taxes.
How to withdraw ELSS?
If you want to withdraw your money from ELSS investments before the three-year lock-in period, there are rules and consequences to consider. So, here is what you need to do:
1) Contact the fund manager
The fund manager is the person who handles your money. They can help you figure out how to cash out your investment. They will also tell you what documents you need to fill out to complete the process. So, reaching out to the fund manager is the first thing you do before withdrawing your ELSS investment.
2) Fill out the redemption form
Next, fill out the redemption form provided by the fund company. You will need to include information such as your name, the amount you invested, and how many units you want to redeem.
3) Submit the form and documents
After completing the form, submit it along with the required documents to the mutual fund office or online portal. These documents may include ID proof and bank details, as requested by the fund company.
4) Wait for processing
After you have submitted your redemption request, the next step is to wait for processing. The fund company will handle your request and determine the processing time and payment method, such as direct bank transfer.
5) Receive redemption proceeds
Once your redemption request is handled, the money from your ELSS investment will be sent straight to the bank account you mentioned in the request. So, this smooth transfer ensures you get your funds quickly and safely.
Is there any penalty for the early withdrawal of ELSS?
If you take out money early from the scheme, there is no direct penalty. But the tax benefits you got will be cancelled.
The money you withdraw will be taxed as income for that year, and you will have to pay taxes on any profits based on how much you earn. So, losing these tax benefits can affect how much money you end up making from your investment.
Final words
If you are thinking about taking out your ELSS money before three years, you need to think carefully. Consider things like your money goals, taxes, and what you can do with your investment. By knowing your options and planning well, you can handle any surprises while making the most of your money. But it is a good idea to talk to a money expert to see how withdrawing your money early might affect your plans and taxes.
