Parag Parikh's NFO has indexation advantage
mutual fund product that earns them more than bank deposits with high tax efficiency could consider the new fund offer of the Parag Parikh Dynamic Asset Allocation Fund. The scheme is structured to bet on a mix of stocks, bonds, and equity arbitrage opportunities.
While most mutual fund schemes in the balanced advantage or dynamic asset allocation categories are equity-oriented, this scheme will maintain the equity allocation between 35% and 65% to make it eligible for the indexation benefits announced by the government in the Union budget for 2023-24.
The portfolio will have a 10-20% allocation to equities, some in arbitrage (to reach between 35-65%), and the rest in fixed-income securities. This structure ensures indexation benefits for investors who hold on to the scheme for more than three years.
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In the Budget 2023, the government scrapped the indexation benefit for debt mutual funds, dealing a blow to the popularity of these schemes. Until then, if one held debt mutual funds for more than three years, the long-term capital gains were taxed at 20% after indexation which significantly reduced the tax outgo. Now, the taxation is in line with the individual's tax slab.
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Distributors believe this scheme scores due to its low cost and tax efficiency, which increase post-expense and post-tax returns for investors. «Investors seeking tax efficiency or a
