An underrated solution, finding its due: Radhika Gupta reacts on tax-efficient options beyond equities

With stock prices running high, cautious investors are staying away from the market, but for wealthy investors looking for tax-friendly options outside of stocks, some new mutual fund strategies are proving to be attractive choices, on which Radhika Gupta, CEO of Edelweiss Mutual Fund, says that an underrated solution is finding its due.

She posted on the social media platform X that, “An underrated solution, finding its due! For the last two years, we have worked to provide a tax-efficient fixed income alternative in Edelweiss Multi Asset Allocation Fund using arbitrage in various asset classes. The track record of both returns over 1/2Y and risk (no negative months) speaks for itself.”


Also Read | Nifty up 13% from April’s low. How should mutual fund investors alter their investment strategy?

Over the last two years, Edelweiss Mutual Fund has quietly worked on a unique approach that addresses this exact concern—a tax-efficient fixed income alternative via the Edelweiss Multi Asset Allocation Fund, and the track record of both returns over one or two years and risk (no negative months) speaks for itself.

She posted a photo of a news article, which was published in ET, saying, “Top tax-efficient MF strategies for risk-averse investors.” The news article was about categories such as arbitrage funds, income plus arbitrage FoFs, multi-asset allocation, and precious metal funds (gold/silver) are gaining traction as these funds typically avoid direct equity exposure while offering better post-tax returns than traditional fixed income.

The ET article mentioned that multi-asset allocation funds that can invest in diverse asset classes, if held for two years, the gains are taxed at the rate of 12.5% and if held for less than two years, the gains are added to the investors’ income and are taxed as per slab rates. These funds are used by investors as debt allocation for tax efficiency, and Edelweiss Multi Asset Allocation Fund was the top scheme with a 9.27% return in a one-year period.

The other categories that investors’ are focussing on are arbitrage funds, income plus arbitrage FoF, gold ETFs, and silver ETFs.

According to the ET story, Edelweiss Silver ETF was also among the top silver ETFs and has offered 7.05% return in the last one year.

In case of arbitrage funds, investors who hold for less than a year pay 20% short - term capital gains and those who hold for more than a year, pay 12.5% LTCG and these funds can be used for short term parking of funds or to move from debt to equity using staggered method.

Also Read | Radhika Gupta explains why she is saving Rs 10 crore for her son’s education

Income plus Arbitrage FoF is a new category of schemes that invest a little less than 65% in fixed income with the balance in arbitrage strategies and some funds also invest in schemes of other fund houses. In this category, if the scheme is held for two years, gains are taxed at the rate of 12.5% and if less than two years, the gains are added to investors income and are taxed as per slab rates.

Investors use Income plus Arbitrage FoF funds as debt allocation for tax efficiency and none of the schemes in the category have completed a year of existence in the market.