Axis Long Term Equity Fund is one of India’s most popular equity-linked savings schemes (ELSS). It offers dual benefits of tax savings under Section 80C of the Income Tax Act and the potential for wealth creation through equity market investments. For investors who have chosen this fund, a common question is, “When can I withdraw my investment?”
Understanding the withdrawal rules, benefits, and implications is essential to make informed decisions about your investment. This article will explain the withdrawal conditions for the Axis Long Term Equity Fund, how the lock-in period works, and the factors to consider before redeeming your units.
Introduction to Axis Long Term Equity Fund
Axis Long Term Equity Fund is an ELSS mutual fund that primarily invests in equity and equity-related instruments. It aims to deliver long-term capital appreciation by diversifying investments across various sectors and market capitalizations.
Why Choose Axis Long Term Equity Fund?
This fund is favored for its strong track record of performance, disciplined investment approach, and potential for tax benefits. Investors seeking exposure to equities while saving taxes often select this fund for its dual advantages.
Tax Benefits Under Section 80C
Investments in this fund qualify for deductions of up to ₹1.5 lakh under Section 80C, reducing your taxable income. However, this tax benefit comes with a mandatory lock-in period.
Understanding the Lock-in Period
The Axis Long Term Equity Fund has a lock-in period of three years, which is a standard feature of all ELSS funds. During this period, investors cannot redeem or withdraw their investment, ensuring long-term capital is committed to the fund.
Why Is There a Lock-in Period?
The lock-in period serves two purposes:
- It aligns with the long-term nature of equity investments, allowing the fund manager to focus on generating returns without worrying about frequent redemptions.
- It ensures compliance with the tax-saving provisions under Section 80C.
Lock-in Period Applies to Each Investment
It is important to note that the lock-in period applies to every investment made in the fund. For example, if you invest ₹10,000 in January 2023 and another ₹10,000 in March 2023, the lock-in for the January investment ends in January 2026, while the lock-in for the March investment ends in March 2026.
When Can You Withdraw?
Once the lock-in period for a particular investment is over, you can withdraw your units from the Axis Long Term Equity Fund. The withdrawal can be partial or full, depending on your financial goals.
Process of Withdrawal
To redeem your investment, you need to initiate the withdrawal process through the platform where you invested, such as the Axis Mutual Fund website, a broker, or a third-party app. After submitting a redemption request, the money will typically be credited to your bank account within 1–3 working days.
Partial vs. Full Withdrawal
After the lock-in period, you have the flexibility to redeem only a part of your investment or withdraw the entire amount. Partial withdrawals allow you to keep some units invested in the fund, benefiting from potential future growth.
Factors to Consider Before Withdrawing
Evaluate Your Financial Goals
Before withdrawing, assess why you invested in the Axis Long Term Equity Fund in the first place. If your goal was long-term wealth creation, redeeming too early may hinder your progress toward achieving it. Ensure that the withdrawal aligns with your current financial objectives.
Impact of Market Conditions
Equity funds are subject to market volatility. Redeeming during a market downturn may result in lower returns or even losses. If possible, wait for favorable market conditions to maximize your gains.
Tax Implications of Withdrawal
While ELSS investments offer tax benefits on the invested amount, the returns from the fund are taxable as per the applicable laws:
- Long-Term Capital Gains (LTCG) Tax: Gains exceeding ₹1 lakh in a financial year are taxed at 10%.
- It is essential to factor in these tax implications while planning your redemption.
Alternatives to Withdrawing
If you’re considering withdrawing due to a temporary financial need, explore alternatives such as a personal loan or a loan against mutual funds. Many financial institutions offer loans by pledging your mutual fund units, allowing you to meet immediate cash requirements without redeeming your investment.
SWP as a Withdrawal Strategy
Instead of a lump-sum withdrawal, you can opt for a Systematic Withdrawal Plan (SWP) after the lock-in period. SWP enables you to withdraw a fixed amount at regular intervals, ensuring a steady income while keeping the rest of your investment intact.
How to Plan Your Withdrawals
Set a Time Frame
Consider keeping your investment in the Axis Long Term Equity Fund for a longer duration, even after the lock-in period, to maximize returns. Historically, equities have delivered better results over a 5–10 year horizon compared to shorter periods.
Reinvest in Other Instruments
Once you redeem your investment, reinvesting the proceeds into other financial instruments like diversified mutual funds, fixed deposits, or equities can help you continue growing your wealth.
Keep Emergency Funds Separate
Avoid withdrawing your ELSS investments to meet emergency expenses. Maintain a separate emergency fund to address unforeseen financial needs without disrupting your investment strategy.
Conclusion
The Axis Long Term Equity Fund is a powerful tool for tax savings and long-term wealth creation. While the lock-in period restricts withdrawals for the first three years, this feature also instills discipline and encourages long-term investing. After the lock-in period, you can withdraw your investment, but it’s crucial to consider your financial goals, market conditions, and tax implications before making a decision.
By planning withdrawals strategically and aligning them with your financial objectives, you can make the most of your investment in the Axis Long Term Equity Fund and continue building wealth effectively.
Related topics:
Is It Good to Invest in Midcap Mutual Funds?
Which 5 Mutual Funds to Buy When the Market is Down?
