Do you not want to invest in debt funds because of the poor tax rules? If yes then there is good news for you. Income Plus Orbitraj FOF will remove your difficulty. Asset management companies have launched this fund to reduce tax burden on investors. This scheme can help you save millions of rupees. Let’s know how.
What is Income Plus Orbitranj FOF?
Income Plus Arbitrage Fof is a mix of date funds and orbitraj funds. It can invest up to 35 per cent in date funds. It can invest the remaining 65 per cent in the orbitraj. The main objective of this fund is to reduce the tax liability of investors. In the last 6-7 months, the interest of many fund houses has increased in such funds. Some fund houses are going to launch such schemes now, including date and orbitraj’s strategy.
What is the purpose of this fund?
At the end of April 2025 this year, the total asset under management of the category of this scheme was Rs 3,161 crore. The purpose of this fund is to generate more returns than traditional liquid or short term date funds. Due to investing up to 65 per cent in arbitrage, the rules of equity funds apply to this fund. This reduces the tax burden on investors. In the union budget of 2023, the government changed the rules of date funds. This increased the tax on the return of debt funds, which reduced the attraction of this fund.
Why did AMC introduce this fund?
In the union budget of 2023, the government changed the rules of debt funds. According to this, investors will have to pay tax according to their tax slab on the capital gains from date funds. This means that if an investors fall in 30 per cent tax slab, then they will have to pay 30 per cent tax on date fund returns. Due to so much tax paying, the real returns from investment in this fund are reduced considerably.
What are the tax rules?
Tax rules are different on equity funds. Long -term capital gains tax rules apply on selling this fund after 2 years of investment. Long Term Capital Gens is taxed at 12.5 percent. In the union budget presented in July 2024, the government changed the tax rules for FOF category funds. The government said that 12.5 percent tax will be applicable on FOF’s long term capital gains. There are only two conditions for this. The first is that investment in it will have to be maintained for at least 2 years. Second, its investment in date funds should not be more than the fixed limit.
Which companies presented this scheme?
Taking advantage of this rule, asset management companies launched new FOFs or tried to make changes in their existing schemes according to this rule. Many AMC companies including SBI Mutual Fund, Nippon Fund, Bandhan have introduced the scheme of this category. In this scheme, investors are showing more interest, who want to invest in date funds.
Investors benefit like this
Suppose you have a long term capital gain of Rs 1 lakh by investing in a date fund. According to the tax rule, if you come in 30 percent income tax slab, then you will have to pay a tax of 30 thousand rupees on it. Suppose you have a long -term capital gain of 1 lakh Roys by investing the same money in income plus orbitraj funds. So on this 1 lakh rupees you will have to pay only 12.5 percent tax, which will be only 12.5 thousand rupees. This date is much less than the tax of 30 thousand rupees of the fund. If your capital gence is in lakh rupees, then your tax saving will also be worth lakhs of rupees.