Hi Sreekanth,
How Equity Saving Funds differ from equity-oriented balanced funds? Which one is best to invest the idle lumpsum money (avoiding bank FDs)? How will taxation affect in both the cases?
1 Answers
Hi,
Very good question!
The investment profile (portfolio allocaiton) of Equity savings funds and Balanced funds are more or less same.
However, in Balanced funds no 'hedging / arbitraging' is permitted.
Equity savings funds & Equity balanced funds invest more than 65 percent of their corpus in equity and are thereby treated at par with equity funds for taxation. So, LTCG is tax-exempt. Consequently, if they are sold within a year, short-term capital gains would be taxed at 15 percent.
The capital appreciation potential of these funds is lower than pure equity fund. Equity savings funds can score over equity funds and balanced funds in terms of lower market risk and are more tax efficient than pure debt funds.
Related articles :
https://www.relakhs.com/mutual-funds-taxation-rules-capital-gains-tax-rates-on-mfs-fy-201516/
https://www.relakhs.com/mutual-fund-schemes-categorization-latest-guidelines/
Hi Sreekanth, Thanks for the answer.
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