How to Redeem ELSS Mutual Funds?

4 mins read
by Angel One
हिंदी
This guide explains how to redeem ELSS mutual funds, detailing online and offline processes, and highlights tax implications and considerations for effective redemption to align with financial goals.

Equity-Linked Savings Scheme (ELSS) mutual funds are a popular investment option in India due to their tax-saving benefits under Section 80C of the Income Tax Act. They have a lock-in period of three years, the shortest among tax-saving instruments.

Once the lock-in period ends, investors often look to redeem their investments. This guide will walk you through redeeming ELSS mutual funds, including considerations and strategies for effective redemption.

What Are ELSS Mutual Funds?

ELSS mutual funds are equity-oriented mutual funds that invest a significant portion of their corpus in equity and equity-related instruments. They provide an opportunity for capital appreciation and offer tax deductions of up to ₹1.5 lakh under Section 80C. 

The mandatory lock-in period of three years ensures that investors stay invested for a minimum duration, which can benefit wealth creation.

Also Read More About What are ELSS Mutual Funds?

How to Redeem ELSS Mutual Funds?

You can redeem ELSS mutual funds online or offline. Here’s the step-by-step guide to redeem ELSS mutual funds.

1. Online Redemption

Most investors today prefer the convenience of online redemption. Here’s how you can redeem your ELSS mutual funds online:

  1. Login to Your Mutual Fund Account: Visit the website of the mutual fund house or the platform (like CAMS, Karvy, or the AMC’s own portal) where you have your ELSS investment. Log in with your credentials.
  2. Select the Scheme: Navigate to the section where your investments are listed. Select the ELSS scheme you wish to redeem.
  3. Enter Redemption Details: Specify the number of units or the amount you want to redeem. Some platforms also allow you to redeem your investment partially.
  4. Confirm and Submit: Review the details you’ve entered. Confirm and submit your redemption request once you are sure everything is correct. You will receive a confirmation message or email about your request.
  5. Funds Transfer: The redeemed amount will be credited to your registered bank account within a few working days, typically within 3-5 business days.

2. Offline Redemption

For those who prefer offline methods or do not have access to online platforms, the following steps outline the offline redemption process:

  1. Visit the AMC Office or Registrar: You can visit the nearest branch of the Asset Management Company (AMC) or the registrar and transfer agent (RTA) such as CAMS or Karvy.
  2. Fill Out the Redemption Form: Obtain and fill out the redemption request form. You need to provide details such as the folio number, scheme name, and number of units or amounts to redeem.
  3. Submit the Form: Submit the completed form along with a copy of your PAN card and any other required documents.
  4. Acknowledgement: Once you submit the form, you will receive an acknowledgement receipt.
  5. Funds Transfer: Similar to online redemption, the funds will be transferred to your registered bank account within a few working days.

Tax Implications of Redeeming ELSS Funds

While ELSS funds provide tax benefits at the time of investment, it’s important to understand the tax implications when redeeming these funds:

  1. Long-Term Capital Gains (LTCG): Since ELSS funds come with a lock-in period of three years, the gains from these funds are considered long-term. Long-term capital gains (LTCG) on equity investments exceeding ₹1 lakh in a financial year are subject to a 10% tax.
  2. Dividend Income: If you have opted for the dividend option in your ELSS fund, the dividends received are also taxable. As per current tax laws, dividends are taxed in the hands of the investor at the applicable slab rate.

Conclusion

Redeeming ELSS mutual funds is straightforward, whether online or offline. However, you must carefully consider your financial goals, tax implications, and market conditions. Planning ahead and making informed decisions ensures that your redemption process is smooth and aligns with your financial strategy. 

Remember, while ELSS funds are a great tool for tax saving and wealth creation, timely redemption can help you optimise your financial portfolio and meet your financial objectives effectively. Invest in ELSS funds with Angel One today. Open your Demat account and start investing!