Balanced Advantage Fund

BAFs always maintain an underlying gross equity exposure of 65% of their assets to be taxed as equity funds. This means that capital gains in them are taxed at 15% if they are redeemed within 1 year. Capital gains in BAF are taxed for gains exceeding 10% ₹1 lakh, if redeemed after 1 year. BAFs typically use derivatives such as futures and options to hedge unhedged equity exposure as per the call of the fund manager.

BAF is expected to generate returns for investors through stock selection, bond selection and asset allocation (at the right time transfer between equity and debt).