Franklin India Balanced Fund's equity allocation is fluctuating between 50 -75 per cent and at present its equity exposure is 64.15 per cent (debt 31.39 per cent). If I redeem my investments in this fund, will it be taxed like a debt scheme? Should I wait till its equity ratio goes above 65 per cent?
- Munedra Jain
A mutual fund must have at least 65 per cent of its net assets in equities to qualify as an equity-oriented mutual fund. However, this does not mean that they have to maintain a minimum equity allocation of 65 per cent daily. The equity allocation is calculated based on the weekly average net assets in equities. If this average is below 65%, the fund stands to forfeit its equity-oriented status. This hasn't happened to Franklin Balanced Fund. So it is still treated as equity mutual funds for taxation purpose.
This article was originally published on March 17, 2016.
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