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How do the lock-in periods of different tax saving instruments differ?

Tax-saving instruments are an integral part of annual financial planning. Such investments typically offer tax deductions under section 80C under the Income Tax Act. 

Every tax-saving instrument has a different lock-in period. Lock-in period is defined as the duration of time within which one cannot withdraw the money that they have invested in a particular fund. Here is a list of some of the best tax-saving instruments under section 80C of the Income Tax Act, 1961 along with their respective lock-in periods.  


  • ELSS: Equity-linked Saving Schemes have the dual benefit of market-linked capital appreciation along with tax savings. Lock-in period for ELSS is 3 years. 

  • National Pension Scheme (NPS): This scheme has been started by the Government of India to let workers in the unorganised sector as well as working professionals to receive a pension after retirement. The amount is generally locked-up till the age of 60, though exceptions apply. Compared to others, this scheme has a more extended lock-in period.

  • Unit-Linked Insurance Plan (ULIP): ULIPs are a mix of insurance and investment schemes. Some part of the amount invested in ULIP is used to provide insurance, and the rest of the amount is invested in stock markets. Typically, ULIPs have a lock-in period of 5 years. 

  • Public Provident Fund (PPF): PPF is long-term investments supported by the Indian Government. PPF accounts have a lock-in period of 15 years that is further extendable by 5 years. However, partial withdrawals are allowed after 7 years.

  • National Savings Certificate (NSC): NSC is a safe and secure low-risk investment option. The withdrawals are fixed and come with a lock-in period of 5 years. NSC can also be pledged for taking loans. 

  • Tax-saving Fixed Deposit (FDs): Similar to regular FDs, the tax-saving FDs under section 80C of the Income Tax Act have a lock-in period of 5 years. 

  • Senior Citizen Saving Scheme: This is a scheme for people above 60 years of age or for someone who is over 55 years and has voluntarily opted for retirement. This scheme matures in 5 years. 

  • Sukanya Samriddhi Yojana: Under this scheme, people can save tax by investing up to ₹1.5 lakhs in the upbringing of their daughter. The investment matures after 21 years and partial withdrawals, for specific expenses, are permitted after the girl child completes 18 years of age.     

Safety, returns, and liquidity are primarily the factors that one needs to consider when deciding upon which tax-saving instrument to go for.

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