I want to know whether balanced funds are considered as equity or debt funds from a taxation point-of-view. Will things change if I opt for growth or dividend reinvestment when DTC comes into effect? - Shekhar
Balanced funds are treated as equity funds from a tax standpoint, as they invest 65 per cent or more of their assets into equity. Hence, if you hold a balanced fund for over 1 year, all your capital gains will be tax-free.
Coming to your second query, you should go for the growth option because you should be investing in balanced funds with at least a 1 year timeframe. Furthermore, when the DTC comes into effect, there will be a dividend distribution tax even on the dividends from equity funds, which will put you to a disadvantage if you opt for any one of the dividend plans. And anyway, there will be absolutely no difference in performance across different plans.
This article was originally published on August 06, 2012.
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