Quant Dynamic Asset Allocation Fund becomes an equity fund after debt fund tax rule change (2024)

Published on March 25, 2023 / By M. Pattabiraman Twitter: @pattufreefincal

Published: March 25, 2023 at 7:15 pm

Last Updated on March 25, 2023 at 7:15 pm

In our coverage of thechange in debt mutual fund taxation rule from 1st April 2023, we have pointed out that several funds will modify their investment mandate. See:Debt mutual funds to be taxed as per slab from 1st April 2023! AndWill SEBI help investors and AMCs tackle the debt fund taxation rule change?

Freefincal investor circle member Piash shared an email from Quant mutual fund indicating that they have modified the investment strategy of their NFO Quant Dynamic Asset Allocation Fund to ensure its taxation status is equity-like in the new financial year.

The following is an extract from the email.

Today, the Parliament passed the Finance Bill, 2023 along with certain amendments. The most significant amendment was the withdrawal of the benefit of indexation on long term capital gains on debt mutual funds for investments made on or after April 1, 2023. From April 1, 2023, debt mutual fund schemes will be taxed at Income tax rates applicable to an individual’s income tax slab. This has significantly affected our earlier positioning and consequently the strategy of quant DAAF from a taxation perspective.
In view of this impact, and in the larger interest of our investors, quant AMC has unanimously decided to reposition the quant DAAF and modify its taxation from debt to equity due to said amendments to the Finance Bill, 2023. Therefore the amended investment strategy of quant DAAF, superseding our previous communication, stands as:-
The unique feature of the scheme stems from its mandate to dynamically rebalance equity exposure (0 to 100%) and debt exposure (0 to 35%), in line with our view on Risk-On or Risk-Off environment, to earn superior risk-adjusted returns. quant money managers have full flexibility and can even hedge up to 100% equity exposure by using derivative instruments in extreme risk-off environment.
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Quant DAAF aims to capture upside in the bull phase and limit the downside in the bear phase and thus reduce the volatility of the overall portfolio.
Even under its newly repositioned avatar, the product is positioned towards traditional investors. In line with our dynamic style of money management, quant DAAF portfolio will be managed dynamically in line with our Risk-On or Risk-Off view on macro environment. Investors can expect to benefit from our VLRT Framework which is an overarching framework for all our funds.

We expect more AMCs to follow suit. Forthcoming NFOs will also be modified to account for this rule change.

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FAQs

Quant Dynamic Asset Allocation Fund becomes an equity fund after debt fund tax rule change? ›

Quant Dynamic Asset Allocation Fund becomes an equity fund after debt fund tax rule change. In our coverage of the change in debt mutual fund taxation rule from 1st April 2023, we have pointed out that several funds will modify their investment mandate. See: Debt mutual funds to be taxed as per slab from 1st April 2023 ...

How are quant dynamic asset allocation funds taxed? ›

Taxation Rules of Dynamic Asset Allocation Mutual Funds

If the funds are indexed, there will be a flat rate of tax at 20%, and the purchase price will be subjected to inflation rates. However, the capital gains are calculated only once every three years between the procurement of the fund and the taxation period.

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Which of the following moves will a dynamic asset allocation fund make if it finds equity markets overvalued? ›

If the PE ratio is high, indicating that the market is overvalued, the fund will reduce its equity exposure and increase its debt exposure. Conversely, if the PE ratio is low, indicating that the market is undervalued, the fund will increase its equity exposure and reduce its debt exposure.

Discover More Details ›

How do you know if a mutual fund is equity or debt oriented? ›

A Mutual Fund scheme is classified as an Equity Mutual Fund if it invests more than 60% (sixty per cent) of its total assets in the equity shares of different companies. The balance amount can be invested in money market instruments or debt securities as per the investment objective of the scheme.

What is an equity asset allocation fund? ›

What is an asset allocation mutual fund? These funds allocate a specific amount to fixed income and equities depending on the fund's goal. They typically offer income and growth potential in one fund. Most asset allocation mutual funds have a stated target for the amounts invested in fixed income and equities.

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What is the tax treatment of quant multi asset fund? ›

Tax treatment depends upon last 12-month average equity allocation and may vary from fund to fund in the category. If the mutual fund units are sold after 3 years from the date of investment, gains are taxed at the rate of 20% after providing the benefit of inflation indexation.

What is the exit load of quant dynamic asset allocation fund? ›

The Quant Dynamic Asset Allocation Fund Direct Growth is rated Very High risk. Minimum SIP Investment is set to 1000. Minimum Lumpsum Investment is 5000. Exit load of 1%, if redeemed within 15 days.

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Is it good to invest in a dynamic asset allocation fund? ›

Advantages of Dynamic Asset Allocation

Portfolio managers may make investments in equities, fixed interest, mutual funds, index funds, currencies, and derivatives. Top-performing asset classes can help offset underperforming assets if the manager makes a bad call.

Find Out More ›

How does dynamic asset allocation work? ›

Dynamic asset allocation is an investment strategy that involves the frequent adjustment of the weights in a portfolio based on the overall market performance or the performance of certain securities.

Which is better, debt fund or equity fund? ›

Which is better debt fund or equity fund? The choice between debt and equity funds depends on individual investment goals, risk tolerance, and time horizon. Equity funds offer higher potential returns but come with higher risk, while debt funds are safer but offer lower returns.

What is the difference between debt funding and equity funding? ›

Debt financing refers to taking out a conventional loan through a traditional lender like a bank. Equity financing involves securing capital in exchange for a percentage of ownership in the business.

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What is the asset allocation between equity and debt? ›

It means that as you grow older, your asset allocation needs to move from equity funds towards debt funds and fixed income investments. Suppose your current age is 25 years. Your portfolio may have 75% of equity-oriented investments and the remaining 25% among debt funds and fixed income securities.

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What is the difference between balanced fund and asset allocation fund? ›

For example unlike balance fund, the asset allocation fund may dramatically vary the proportion allocated to each market based on the prediction of its portfolio manager. Also while the balanced funds are designed to be low risk the asset allocation funds are not designed to be low risk.

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What is the best asset allocation strategy? ›

If you are a moderate-risk investor, it's best to start with a 60-30-10 or 70-20-10 allocation. Those of you who have a 60-40 allocation can also add a touch of gold to their portfolios for better diversification. If you are conservative, then 50-40-10 or 50-30-20 is a good way to start off on your investment journey.

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What are the four types of asset allocation? ›

There are several types of asset allocation strategies based on investment goals, risk tolerance, time frames and diversification. The most common forms of asset allocation are: strategic, dynamic, tactical, and core-satellite.

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How are multi asset allocation funds taxed? ›

If you sell such funds after holding them for more than 3 years, then you have to pay income tax at the rate of 20 per cent on the profit made on it. But if you make profits after holding such funds for less than 3 years, then you will have to pay tax on the profits as per the income tax slab.

Get More Info Here ›

How are MLP mutual funds taxed? ›

As partnerships for federal income tax purposes, MLPs generally do not pay federal taxes. Instead, limited partners report on their tax returns their share of the MLP's income, gains, losses, and deductions, and are taxed at their individual tax rates.

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Do I pay taxes on mutual fund capital gains? ›

Like income from the sale of any other investment, if you have owned the mutual fund shares for a year or more, any profit or loss generated by the sale of those shares is taxed as long-term capital gains. Otherwise, it is considered ordinary income.

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How are REIT mutual funds taxed? ›

The majority of REIT dividends are taxed as ordinary income up to the maximum rate of 37% (returning to 39.6% in 2026), plus a separate 3.8% surtax on investment income. Taxpayers may also generally deduct 20% of the combined qualified business income amount which includes Qualified REIT Dividends through Dec.

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