Equity savings vs Conservative hybrid: The better option

Imagine a scenario where two hybrid funds invest one-third of their portfolios in equity stocks but are taxed differently. This is precisely the case with Equity savings and Conservative hybrid funds. Here's why: This is the construction of an equity saving fund: 33.3 per cent in equity + 33.3 per cent in debt + 33.3 per cent in arbitrage Here's the portfolio construction of a conservative hybrid fund: 10-25 per cent in equity + 75-90 per cent in debt Technically speaking, all mutual funds with less than 35 per cent equity allocation have a harsher tax. In such cases, your gains are added to your income and then taxed as per your tax bracket. For example, the profit on your mutual fund investment will be subject to a 30 per cent tax if your total income for the year crosses Rs 10 lakh (old tax regime) or Rs 15 lakh (new tax regime). By that logic, equity savings funds should also be subjected to this tax structure. But it's not. Since these funds dabble in arbitrage opportunities, they are taxed differently - and leniently. Hence, your gains up to Rs 99,999 are not taxed at