So what is the implications of doing a SIP on an ELSS. Well here are the gotchas
- ELSS has a 3 year lock-in. So that if you do a SIP on this, each installment will have a lock in for 3 years. So your SIP will become your SWP :)
- If you pick a dividend reinvestment option, each time a dividend is issued by the fund house, that would get invested on that day back into the ELSS which will result in a 3 year lock-in of that dividend.
- All your gains will be taxfree (considering today's tax rules) since this will qualify for long term capital gains tax on equity which is currently 0%
This post was written by Vivek Venugopalan on the blog Personal Finance in India - The not so obvious stuff