ELSS carries a three-year lock-in, and most investors read that as one countdown starting whenever they began investing. A SIP doesn’t work that way. Every instalment is its own purchase, and every purchase gets its own three-year lock-in, measured from its own date - not from the SIP’s start date.
Twelve monthly instalments through a calendar year produce twelve separate unlock dates, staggered a month apart, each exactly three years after its own instalment:
- The January instalment unlocks in January, three years later.
- The February instalment unlocks in February, three years later.
- And so on through December - the SIP’s first year of instalments doesn’t fully clear the lock-in until the fourth year is underway, one month’s units at a time.
Redemption Runs First-In-First-Out, Not by Choice
Redemption, when it’s allowed, follows a strict first-in-first-out rule: the registrar releases the oldest eligible units before any newer ones, regardless of which units an investor might prefer to sell. There’s no way to choose to redeem a later instalment while an earlier, still-locked one remains held.
A rolling, per-instalment lock-in is, if anything, a gentler mechanism than a single cliff-edge date would be - it never locks a full year’s contribution behind one distant deadline. The practical upshot is just that an ELSS SIP investor checking “when can I withdraw” is asking the wrong question. The right one is which instalment, since each one has its own answer.
Ask which instalment, not when. Each purchase carries its own three-year clock from its own date, so the first year of a SIP does not fully clear until the fourth year is underway - one month’s units at a time.
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