Lock-in vs exit load
These two are often confused:
| Lock-in | [Exit load](/learn/glossary/exit-load) | |
|---|---|---|
| Can you withdraw early? | No | Yes |
| What happens if you try? | Redemption is not allowed | A fee (often 1%) is deducted |
| Purpose | A condition for a tax benefit or a product feature | Discourage quick in-and-out trading |
Lock-ins you will meet
| Product | Lock-in | Notes |
|---|---|---|
| ELSS | 3 years per unit | SIP: each instalment has its own clock |
| ULIP | 5 years | Money-in rules apply for early exits |
| NPS Tier 1 | Until retirement age, with limited partial withdrawals | See [NPS](/learn/glossary/nps) |
| PPF | 15 years | Partial withdrawals allowed after a set period |
| Tax-saver bank FD | 5 years | Premature withdrawal not allowed |
| Closed-end mutual fund | Until the scheme's maturity date (units may be listed) | Exit through the exchange |
How lock-in works with a SIP
A lock-in counts from each unit's allotment date. In a monthly ELSS SIP, the units from January are free to redeem three years later in January, while the units from February remain locked for another month. After the first three years, a trickle of units unlocks every month.
Why it matters in planning
- Do not put money you may need into a locked product.
- A lock-in is not a penalty period, it is a commitment. Some people find the commitment useful for discipline.
- A lock-in does not protect you from losses; the value can fall while you cannot sell.
Questions people ask
What is lock-in period in mutual funds?
The time you cannot redeem.
Which mutual fund has a lock-in?
ELSS (3 years) and closed-end funds. Most open-ended funds have none.
Is lock-in the same as exit load?
No: lock-in blocks redemption; exit load charges a fee.
Does lock-in apply to each SIP instalment?
Yes.
Keep going
Run the numbers
ELSS calculator
How we can help
Sources
- SEBI category rules (ELSS)
- IRDAI ULIP regulations
- PFRDA NPS regulations
- Government of India small-savings scheme rules.
Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. This page is general education, not personal advice. Back to the full glossary