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Fund houses have been promoting multi asset allocation funds. According to one school of thought, the category still offers indexation benefits of 20% that was applicable to debt funds.
In fact, three fund houses have launched multi asset allocation fund in the recent past while other two fund houses have filed draft offer documents to launch their multi asset allocation funds.
Further, over the last two months, the AUM of multi asset allocation has also increased by 13% to Rs.30,000 crore as on May 2023, shows AMFI data.
From April 1, 2023, the government has removed the benefits of LTCG from debt funds having domestic equity exposure of less than 35% of the total assets. Such categories of funds include pure debt funds, gold ETFs and international FOFs.
However, the inclusion of the phrase 'less than 35%' within the finance bill has sparked a new perspective that the Finance Act 2023 has introduced a third taxation category for mutual funds. Specifically, this category pertains to funds that have equity exposure ranging from 35% to 65%. If the holding period exceeds 36 months, these funds will still be eligible for indexation benefits.
There has been an interpretation that multi asset allocation funds fall under this taxation ambit.
