A reader says, ” Can you please let me know funds with indexation benefits apart from Parag Parikh Dynamic asset allocation fund and Edelweiss Multi Asset Allocation Fund excluding EquitySavings and Arbitrage?” A discussion. Let us begin with some context.
Note: Tax rules change often. The rules mentioned here are valid as of April 2024 (at the time of writing). If you read this article later, please check the existing tax rules.
Disclaimer: No fund is mentioned in this article as a recommendation. Investors should not buy risky funds to save on tax.
Mutual funds and ETFs can be taxed in three different ways following the amendment to the finance bill 2023, announced in March 2023.
Taxation status from 1st April 2023
- Funds holding 65% or more of Indian equity or Indian equity ETFs are equity funds. Short-term capital gains from units aged one year or less will be taxed at 15% with cess. Gains from older units are tax-free up to Rs. one lakh. Above this, they will be taxed at 10% without indexation.
- Funds holdings less than 65% Indian equity but more than 35% Indian equity are non-equity funds (we will refer to these as class I). Gains from units purchased on or before 3Y are short-term gains and taxed as per slab, and gains from older units are taxed at 20% with indexation.
- Funds holding less than or equal to 35% equity will be taxed as per slab, regardless of the age of the unit. Let us call these class II non-equity funds. This will only apply to fresh purchases made from 1st April 2023.
Parag Parikh Conservative Hybrid Fund is a class II non-equity fund. So, its gains will always be taxed as per slab.
(1) Parag Parikh Dynamic Asset Allocation Fund and (2) Edelweiss Multi Asset Allocation Fund are class I non-equity funds. It will use direct equity and arbitrage positions to maintain equity allocation greater than 35% but less than 65%. So, its long-term gains will be subject to 20% tax with indexation.
This rule change resulted in the introduction of Balanced Hybrid Funds. These invest in equity (40-60%) and debt (40-60%) instruments. No Arbitrage would be permitted in this scheme. So, their long-term gains will be subject to 20% tax with indexation. Currently, there are two funds in this category:
- (3) 360 ONE Balanced Hybrid Fund launched in Sep 2023
- (4) WhiteOak Capital Balanced Hybrid Fund launched in Oct 2023
To check for any more such funds, we look at the Feb 2024 factsheets (at the time of writing, not all AMCs have released the Mar 2024 factsheet). The data below will be updated from the April 2024 edition of our monthly debt and hybrid fund screeners.
Note: This is only data for one month. This is only to create a shortlist for further investigation by the interested reader. They should dig deeper into past factsheets and fund brochures or AMC websites to understand the taxation status of the funds. Please note that some funds may change taxation status. See: Should I pay tax as per slab if my fund’s equity holdings drop to 35% for one month? And Should I pay more tax if my fund’s equity holdings drop below 65%?
List of hybrid mutual funds taxed with indexation benefits* This list excludes aggressive hybrid, arbitrage and equity savings funds classified as equity funds for taxation. No claim is made that this list is exhaustive.
| Fund | Domestic Equities |
| WOC Balanced Hybrid Fund | 52.9371 |
| Nippon India Multi-Asset Fund | 50.9267 |
| 360 ONE Balanced Hybrid Fund | 44.1331 |
| Motilal Oswal Multi-Asset Fund* | 42.2341 |
| DSP Multi Asset Allocation Fund | 40.6899 |
| SBI Multi Asset Allocation Fund* | 40.4418 |
| Edelweiss Multi Asset Allocation Fund | 39.6554 |
| UTI ULIP | 37.4734 |
| WOC Multi Asset Allocation Fund | 36.6422 |
| Parag Parikh Dynamic Asset Allocation Fund | 36.5142 |
* It may be taxed like equity or class I non-equity funds, depending on the average equity holding of the last 12 months from the redemption date.
Do share this article with your friends using the buttons below.
🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! ⇐ More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Podcast: Let’s Get RICH With PATTU! Every single Indian CAN grow their wealth!
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
🔥Now Watch Let’s Get Rich With Pattu தமிழில் (in Tamil)! 🔥
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Have a question? Subscribe to our newsletter using the form below.
- Hit ‘reply’ to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. – Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.
Your Ultimate Guide to Travel
This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)