Multi manager funds


#1

Are multi manager funds taxed differently or just like mutual fund investments?


#2

Unlike traditional funds, multi manager funds are not very tax friendly. You do not get exemption on capital gains after one year. You can only get indexation benefits after you have stayed invested in the fund for a minimum of 3 years. If you redeem your investment before the 3 year period, the gains will be added to your income and taxed as per your income tax slab.


#3

How does taxation pan out for multi manager funds compared to normal mutual funds?


#4

Irrespective of whether the underlying funds selected by the multi manager fund are equity or debt ones, they are treated as non equity for taxation. So unlike traditional funds you do not get exemption on capital gains after one year. You can only get indexation benefits after you have stayed invested in the fund for a minimum of 3 years.


#5

Hi Reba,

Compared to regular Mutual Funds, when your Multi-manager Funds is rebalanced to maintain your debt and equity allocation, the tax on capital gains will be the same as that of a debt fund. Any fund that invests less than 65% assets in equities is considered a debt fund for taxation. Therefore, even if your 40% money is invested in equities, gains from the equity part will be taxed like those from a debt fund. Also, if you get a dividend on your funds that exceeds Rs. 10 lakhs, then a tax of 10% is applicable.

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Team BB