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In response to our article – Parag Parikh Dynamic Asset Allocation Fund: Who ought to make investments? – many readers are usually not clear concerning the taxation standing of the fund. Some even declare that will probably be taxed as per slab. On this article, we clarify the fund’s taxation standing.
Be aware: Tax guidelines change usually. The foundations talked about listed below are legitimate as of Feb 2024 (on the time of writing). For those who learn this text later, please examine the present tax guidelines.
Mutual funds and ETFs might be taxed in three alternative ways following the modification to the finance invoice 2023, introduced in March 2023.
Taxation standing from 1st April 2023
- Funds holding 65% or extra of Indian fairness or Indian fairness ETFs are fairness funds. Brief-term capital features from items aged one 12 months or much less shall be taxed at 15% with cess. Positive aspects from older items are tax-free as much as Rs. one lakh. Above this, they are going to be taxed at 10% with out indexation.
- Funds holdings lower than 65% Indian fairness however greater than 35% Indian fairness are non-equity funds (we’ll refer to those as class I). Positive aspects from items bought on or earlier than 3Y are short-term features and taxed as per slab, and features from older items are taxed at 20% with indexation.
- Funds holding lower than or equal to 35% fairness shall be taxed as per slab, whatever the age of the unit. Allow us to name these class II non-equity funds. This can solely apply to recent purchases comprised of 1st April 2023.
Parag Parikh Conservative Hybrid Fund is a category II non-equity fund. So, its features will all the time be taxed as per slab.
Parag Parikh Dynamic Asset Allocation Fund is a category I non-equity fund. It can use direct fairness and arbitrage positions to keep up fairness allocation higher than 35% however lower than 65%. So, its long-term features shall be topic to twenty% tax with indexation.
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