I have invested in two ELSS schemes in 2007 - HDFC Long Term Advantage and SBI Magnum Tax Gain in the dividend reinvestment option. Is it true that I cannot redeem my units unless the scheme does not declare dividend for at least three consecutive years? And can I now convert from the dividend reinvestment to growth option. If yes, then how?
-S.C. Rawat
All tax saving schemes have a three year lock in period. So if you have invested in an equity linked savings scheme (ELSS), then you cannot redeem any amount invested in it before three years from the date of investment. This will also include dividend reinvestment and for this, the lock-in period will be three years from the payment of the dividend amount. The lock-in applies separately corresponding to each investment, as in the case of a systematic investment plan. But if you want to change your initial choice of dividend reinvestment and want to opt for the growth option instead, you can do so anytime as it does not amount to any transaction.
This article was originally published on September 05, 2008.
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