Lock-in

A lock-in is a hard rule, not a fee. During it, redemption is simply not allowed, which is different from an exit load where you can leave but pay for it. Lock-ins usually accompany a tax benefit, because the government or scheme wants the money to stay put.

Lock-in versus exit load

The two are easy to confuse but work very differently. An exit load is a price for leaving early; pay it and you are out. A lock-in is a locked door: during the period, no amount of urgency lets you redeem, so the money is genuinely unavailable. Knowing which applies tells you whether an investment can double as emergency money. An exit-load fund can; a locked one cannot.

Where you meet it

Lock-ins cluster around tax-saving and retirement products. ELSS funds have a three-year lock-in, the shortest among section 80C options; PPF runs fifteen years with limited early access; and products like the NPS lock money until retirement. The common thread is a benefit in exchange for commitment: you accept that you cannot touch the money, and in return you get a deduction, a higher rate, or a tax break.

What to check first

Before putting money into anything with a lock-in, be sure you will not need it during the period, and that the lock-in length matches the goal. A short lock-in on an equity product like ELSS is not the same as a safe horizon, because the value can still be down when the door opens.