In India, the taxation of Multi-Asset Allocation Funds (MAAF) depends mainly on how much equity the fund holds. These funds invest in at least 3 asset classes (typically equity, debt, and gold) with a minimum of 10% in each.
The key rule is the 65% equity threshold, which determines whether the fund is taxed like equity or debt/other mutual funds.
The key tax rules stem from changes introduced in the Union Budget 2024, which remain applicable as of FY 2025-26, with no major alterations noted in the 2026 budget beyond adjustments like increased Securities Transaction Tax (STT) on derivatives that indirectly affect some fund strategies.

👉 “Multi-Asset Funds invest in equity, debt and gold together, so when one asset falls, another supports the portfolio.”

Taxation of Multi Assets Funds in India (Latest Rules 2026)

1. Equity-Oriented Multi-Asset Funds (Equity ≥ 65%)

These funds maintain 65% or more in Indian equities (including arbitrage).

Short-Term Capital Gain (STCG)

  • Holding period: Less than 12 months
  • Tax rate: 20%

Long-Term Capital Gain (LTCG)

  • Holding period: More than 12 months
  • Tax rate: 12.5%
  • ₹1.25 lakh LTCG per year is tax-free

📌 These are more tax-efficient, which is why many multi-asset funds maintain equity around 65-70%.

2. Non-Equity Multi-Asset Funds (Equity < 65%)

Short-Term Gain

  • Any holding period below 24 months
  • Taxed as per your income tax slab

Long-Term Gain

  • Holding period: More than 24 months
  • 12.5% tax (no indexation)

This rule applies to funds where equity is between 35% and 65% or lower.

👉 “If the fund keeps more than 65% in equity, then it gets equity mutual fund taxation — only 12.5% tax after 1 year and ₹1.25 lakh profit tax-free every year.”

 

Quick Comparison

Equity Allocation Holding Period Tax Treatment
≥ 65% equity < 1 year 20% STCG
≥ 65% equity > 1 year 12.5% LTCG (₹1.25L exemption)
< 65% equity < 2 years Taxed as per income slab
< 65% equity > 2 years 12.5% LTCG

Disclaimer: The Author (CA Jitendra Panwar) is AMFI Registered Mutual Fund Distributor. The above article is for educational purposes only. Mutual fund investments are subject to market risks. Past performance is not indicative of future results. Please consult your financial advisor / CA before investing.