What is the tax treatment of multi-asset allocation funds?

Mutual fund taxation underwent a significant shift since April 1, 2023. Originally, funds were categorised as equity funds or non-equity funds, with equity funds requiring a minimum 65 per cent allocation in equities. The new system further breaks down the non-equity category based on equity exposure into two subgroups: up to 35 per cent in equities and between 35 per cent and 65 per cent in equities. With that context in mind, let's first learn what multi-asset funds are before understanding their taxation. What are multi-asset funds? Multi-asset allocation funds are a mutual fund category that invests at least 10 per cent each in equities, debt, and a third asset class, such as gold or real estate. Beyond the minimum 10 per cent, fund managers can adjust allocations in any proportion, which gives these funds their distinct nature. Taxation of multi-asset funds In order to find out how mutual funds are taxed, we have to look at their average equity allocation over the past 12 mon