Archive · 15 Sep 2025
Arbitrage Fund Differences and Tax Implications
Imagine you're investing money.
There are different types of funds, like arbitrage funds, which are treated like stocks.
If you sell an arbitrage fund after holding it for more than a year, you pay a tax of 12.5% plus extra charges on any profit.
Another type is an income plus arbitrage fund, which is like a fund made up of other funds.
For these, if you sell after two years, you pay the same tax rate.
If you are new to investing, it might be better to invest in funds that have been around for a while because they have a history you can check.
New funds are like new cars; you don't know how well they will perform.
Arbitrage funds are treated as equity funds.
Income plus arbitrage funds are treated as a fund of funds.
Gains on arbitrage funds become long-term after 12 months.
Gains on income plus arbitrage funds become long-term after 24 months.
Long-term gains from both funds are taxed at 12.5% plus applicable charges.
- Who
- S. Sanyal, Sandip Chatterjee
- What
- Difference between Arbitrage Funds and tax implications; Advice on investing in New Fund Offers (NFOs)
- When
- July 23, 2024 (Union Budget announcement)
- Where
- Siliguri, Calcutta
- Why
- To understand the tax implications of investments in arbitrage funds and assess the prudence of investing in New Fund Offers.
- Types of Funds Discussed
- Arbitrage fund, Income Plus Arbitrage fund
- Arbitrage Fund Taxation
- Taxed as equity fund; long-term gains (after 12 months) taxed at 12.5% plus surcharge.
- Income Plus Arbitrage Fund Taxation
- Taxed as a fund of funds; long-term gains (after 24 months) taxed at 12.5% plus surcharge.
- Tax Rate
- 12.5% plus surcharge
- NFO Advice
- Safer for new investors to choose established funds with a proven track record.