Question 3 of 7
What is the impact of a lock-in period on an investment product that offers tax deduction?
A
It enhances liquidity.
B
It is a trade-off between liquidity and tax deduction.
C
It guarantees higher returns.
D
It makes the investment tax-free.
Correct Option:
B
Explanation
A lock-in period restricts access to the invested money for a specified time. Investors receive a tax benefit in exchange for reduced liquidity, making the lock-in a trade-off between immediate access to funds and tax savings.
