Balanced advantage funds
Source: Mint Sep 14, 2021
A balanced advantage fund (BAF) is a hybrid mutual fund that can invest in equity as well as debt.
BAFs always maintain an underlying gross equity exposure of 65% of their assets to be taxed as equity funds. This means capital gains in them are taxed at 15% if redeemed within 1 year. Capital gains in BAFs are taxed at 10% for gains over ₹1 lakh, if redeemed after 1 year. BAFs typically use derivatives such as futures and options to reduce the unhedged equity exposure as per the fund manager’s call.
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