Income Tax Filing: Income From Hybrid Mutual Funds

How do you account for income from the sale of hybrid mutual fund units during income tax filing? Here are essential details. 

Edited transcripts 

Udayan Ray: Welcome to FundooMoney web series on tax filing. We are discussing various aspects people need to keep in mind while filing taxes. In this particular segment, we are going to talk about the kind of treatment and the kind of things you need to do if you made some money selling a hybrid mutual fund. 

To help us, we have with us, renowed tax expert Mr Swami Saran Sharma with us. He is going to give us insights on this particular topic.

Swami, how is a hybrid mutual fund seen by tax authorities? Is it an equity product or a debt product?

Swami Saran Sharma: Udayan, actually it depends on the constitution of the fund. If equity constitutes 65% or more of the mutual fund, it is termed as an equity mutual fund. Otherwise, if it is less than 65%, it is considered as a debt mutual fund. 

Udayan Ray: So, that popular term of balanced funds. A lot of fund houses say that our balanced funds are 65% or more (in equities), so mutual funds investing 65% or more in equities would be treated as equity mutual funds. Mutual funds that invest less (than 65% in equities), will be (treated as) debt mutual funds. 

As part of this web series, we have been covering treatment of equity mutual funds and debt mutual funds. Anybody watching this segment, can go on to those segments and figure how their hybrid funds will get treated while filing for taxes.

Thank you so much Swami. I am sure people found this information useful. They can go to all our leading social media platforms for this information and more so that they can ask smart and intelligent questions to their tax advisor and make sure that they are filing their (tax) returns properly. Of course, we are on our website www.fundoomoney.com.