I have been investing in Fidelity Tax Advantage since October 2007. In the first year, I was investing in the dividend re-investment option but a year later I shifted to the growth option. Will the first year’s SIP be included in the three years lock-in period? When can I withdraw the total money?
- Jayant Rao
Investing in tax saving funds through SIPs is tricky. Each SIP is a fresh investment in the fund and each instalment in a tax saving fund needs to complete three years of holding, which is the compulsory lock-in period.
If you have been investing through SIPs in the fund since October 2007, that doesn’t mean that your lock-in period will get over in October 2010. Only the first SIP would have completed its lock-in period in October 2010. The subsequent units bought by SIP investments after October 2007 can be redeemed only with each passing month when they complete their three-year lock-in.
Your SIPs in the first year were in the dividend re-investment option will also need to adhere to the compulsory three-year lock-in. A change from dividend re-investment to growth does not change the lock-in status. Since you were investing in the dividend re-investment option in the first year; the three-year compulsory lock-in period is also applicable to the dividends reinvested.
This article was originally published on January 18, 2011.
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