BAFs at all times keep an underlying gross fairness publicity of 65% of their belongings to be taxed as fairness funds. This means capital features in them are taxed at 15% if redeemed inside 1 12 months. Capital features in BAFs are taxed at 10% for features over ₹1 lakh, if redeemed after 1 12 months. BAFs sometimes use derivatives equivalent to futures and choices to scale back the unhedged fairness publicity as per the fund supervisor’s name.
BAFs are anticipated to generate returns for traders by inventory choice, bond choice and asset allocation (shifting between fairness and debt on the proper time).
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