Yes, switching is allowed and you can switch out of the ELSS scheme into another scheme and vice- versa. However, the switching is allowed only after the lock-in period of 3 years is over.

If you invest in ELSS through SIPs, every SIP instalment would have an independent lock-in period of 3 years. So, suppose you start investing in SIP from January 2021. The first instalment of January 2021 would be available for redemption in January 2024. The second instalment in February 2021 would be available in February 2024 and so on.

The returns earned on redemption would be Rs.50, 000, i.e. Rs.1.5 lakhs – Rs.1 lakh. Since the return is below Rs.1 lakh and assuming you do not have any other equity returns, there would be no tax liability. The entire redemption value would be tax-free in your hands.

The investment strategy of an ELSS fund is determined by the fund manager. At least 65% of the fund is invested in equity. Of the remaining, the fund manager might invest a part of the corpus in debt instruments for stability. So, there is no rule against debt investment. ELSS funds can invest in debt but at least 65% of the portfolio should be exposed to equity.

Under Growth plans, the returns earned by the portfolio are reinvested in the scheme itself while under Dividend plans a part of the returns are distributed among investors in the form of dividends. Thus, Growth plans do not offer periodic returns. They provide capital appreciation and a lump sum amount when you withdraw. Dividend plans, on the other hand, offer periodic dividends and a lump sum amount when you withdraw. This lump sum amount, however, is lower than that provided by Growth plans.