As per the comparison of tax-saving instruments in the NISM Series X-B workbook, what is the lock-in period applicable to an Equity Linked Savings Scheme (ELSS)?

[ A ]3 years, after which units can be withdrawn at any time[ CORRECT ]

[ B ]5 years, the same lock-in as a Tax Saving Bank Fixed Deposit

[ C ]15 years, the same lock-in as Public Provident Fund (PPF)

[ D ]Lock-in until the investor turns 60 years of age, the same as NPS Tier 1

Takeaway

Option A is correct: the workbook's comparison table states ELSS has a 3-year lock-in, after which units can be withdrawn at any time.

Derivation

In comparing ELSS, NPS Tier 1, and Fixed Income Tax Saving Instruments (PPF and Tax saving Bank FD), the workbook notes very different liquidity profiles: ELSS has a 3-year lock-in; NPS Tier 1 is locked in till age 60 with restricted partial withdrawals; PPF is locked in for 15 years from account inception with partial withdrawal possible after 5 years; and Tax Saving Bank FD is locked in for its entire tenure. Candidates often mix up these lock-in periods since all four are Section 80C-eligible tax-saving instruments.

Why the others fail

B — 5 years, the same lock-in as a Tax Saving Bank Fixed Deposit

The workbook states Tax Saving Bank FD has a lock-in for the entire tenure of the deposit, separate from ELSS's 3-year lock-in.

C — 15 years, the same lock-in as Public Provident Fund (PPF)

PPF has a 15-year lock-in from inception of the account per the workbook; ELSS has a much shorter 3-year lock-in.

D — Lock-in until the investor turns 60 years of age, the same as NPS Tier 1

NPS Tier 1 is locked in until age 60 as per the workbook; ELSS has a fixed 3-year lock-in regardless of the investor's age.