A fund of fund (FoF) is a mutual fund that invests in different mutual funds. Fairness oriented FoF is a fund that invests 90% or extra in different ETFs which invests 90% or extra in home equities.
In regards to the writer: Manmohan Sethumadhavan is a freelancer, investor, and private finance fanatic “in the hunt for absolutely the reality.” You may observe Manu on Twitter @ManuTsr. Additionally, learn his article: Find out how to calculate LTCG with Grandfathering for fairness shares that break up – Find out how to fill Schedule 112A.
For models acquired earlier than 01-APR-2023, the taxation is as follows.
- STCG (interval of holding lower than 1 yr) @15%
- LTCG (interval of holding 1 yr and above) @10% for positive aspects above 1 Lakh.
LTCG u/s 112A:
“The tax payable by the assessee on capital positive aspects from switch of a long-term capital asset being a unit of an fairness oriented fund shall be calculated on such positive aspects exceeding one lakh rupees on the fee of ten per cent. Fairness oriented fund means a mutual fund the place it invests a minimal of 65% in fairness shares of listed home corporations or in case of FoFs, a minimal of 90% in one other ETFs, and such ETFs invests a minimal of 90% in fairness shares of listed home corporations.”
STCG u/s 111A:
“The tax payable by the assessee on capital positive aspects from switch of a short-term capital asset being a unit of an fairness oriented fund shall be calculated on such positive aspects on the fee of fifteen per cent. Fairness oriented fund shall have the that means as outlined in part 112A.”
Part 50AA was launched by the Finance Act, 2023, w.e.f. 01-APR-2024. This was initially meant to amend the taxation of Market-linked debentures and the title of the part continues to be “Particular provision for computation of capital positive aspects in case of Market Linked Debenture”. Later “Specified Mutual Funds” had been additionally included within the part, which modified the taxation of debt mutual funds satisfying sure circumstances.
50AA:
“The place the capital asset (in case of capital positive aspects) is a unit of a Specified Mutual Fund acquired on or after 01-04-2023 or a MLD, the positive aspects shall be deemed to be short-term capital positive aspects. ‘Specified Mutual Fund’ means a fund, the place 35% or much less is invested within the fairness shares of home corporations.”
Although it appeared this was meant to vary the taxation of some debt funds, intentionally or not, all Fund of Funds fall below this class, since such funds by no means put money into any fairness shares instantly. Thus the capital positive aspects from Fairness Oriented Fund of funds acquired on or after 01-04-2023 shall be at all times deemed to be short-term as they’re “Specified Mutual Funds”. However since they’re “Fairness Oriented Funds” as per part 112A, the short-term positive aspects are calculated as per part 111A, and thus @15% flat.
Notice that the Fund of Funds which don’t fulfill the 90% situation as per 112A, (like debt-oriented, fairness FoFs investing in different Mutual funds (not ETFs), multi-asset FoFs, international FoFs, and so on.) will probably be taxed as per slabs for models acquired on or after 01-04-2023, regardless of holding interval.
To summarise:
| For models acquired on or after 01-04-2023 | |
| Kind of Fund | Taxation (regardless of holding interval) |
| Fairness oriented FoF | 15% flat |
| Different Fairness FoF | As per slabs |
| Different FoF | As per slabs |
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