Question

How are balanced advantage fund (dynamic asset allocation fund) gains taxed?

Accepted Answer

As equity funds (STCG 15%, LTCG 12.5%) if the scheme maintains at least 65% equity on average; otherwise as debt/hybrid — depends on actual equity allocation during the holding period — Balanced advantage funds dynamically vary equity-debt allocation. Tax treatment depends on whether the scheme qualifies as equity-oriented (at least 65% in equity/equity-related instruments on average during the financial year). Most BAFs are structured to maintain 65%+ equity (including arbitrage) to qualify for equity taxation — STCG at 15% and LTCG at 12.5% above ₹1.25 lakh.