Balanced advantage funds are taxed like any other mutual fund in India. The tax treatment depends on the holding period of the units:
Short-Term Capital Gains (STCG)
- If you sell your units within one year of purchase, the profit you make is considered short-term capital gains.
- This profit is taxed at your income tax slab rate, along with your other income.
Long-Term Capital Gains (LTCG)
- If you sell your units after one year of purchase, the profit you make is considered long-term capital gains.
- This profit is taxed at a flat rate of 10% if it exceeds Rs. 1 lakh in a financial year.
- There is no tax on LTCG if the profit is Rs. 1 lakh or less.
Dividend Income
- When a balanced advantage fund distributes dividends, it is taxed at the source (TDS) at a rate of 10%.
- You can claim credit for this TDS against your tax liability.
Example:
- You invest Rs. 1 lakh in a balanced advantage fund.
- After two years, you sell the units for Rs. 1.2 lakh.
- Your profit is Rs. 20,000.
- As you held the units for more than one year, this is considered long-term capital gains.
- You will have to pay tax at 10% on Rs. 10,000 (Rs. 20,000 - Rs. 10,000).
Note: The tax treatment of balanced advantage funds may vary depending on the specific fund and its investment strategy. It's always best to consult with a financial advisor to understand the tax implications of your specific investment.
