Is ELSS taxable after 5 years?

Equity-linked Savings Schemes (ELSS) have a mandatory lock-in period of 3 years. Investments withdrawn before 3 years face penalties. The good news is that ELSS enjoys EEE (exempt-exempt-exempt) tax status. This means an investment amount up to ₹1.5 lakh is eligible for tax deduction under Section 80C. ELSS's investment growth and capital gains are tax-exempt under Section 10(38) after 1 year.

So, after the lock-in period of 3 years, investors can choose to remain invested or withdraw partially/fully anytime without any tax liability. There is no requirement to hold ELSS for 5 years to avail tax benefits. As per the Union Budget 2024, if you sell the ELSS funds after 1-year post the lock-in period of 3-years, long-term capital gains from ELSS up to ₹1 lakh per year are tax-exempt. However, for gains above ₹1 lakh, a 12.5% LTCG tax applies. Overall, ELSS offers attractive tax efficiency coupled with high growth potential over the long run.