Parag Parikh Liquid Fund - Regular Plan

Suitability:

Liquid funds invest in bonds having maturity of up to three months. They are suitable to park the amount you have set aside to meet any emergency needs or any surplus money that you don't need for a few weeks up to a year. You can expect to earn better returns than what you would get from a bank account.

The risk of incurring a loss in these funds is negligible but they do not guarantee returns or safety of capital. Though rare, there have been few instances when liquid funds have incurred losses.

Remember, these funds are geared to deliver only marginally higher returns than your bank account. They deliver steady, but low returns and are not suitable to build wealth in the long run.

Taxability of earnings:

Capital gains

• If the mutual fund units are sold after 3 years from the date of investment, gains are taxed at the rate of 20% after providing the benefit of inflation indexation.
• If the mutual fund units are sold within 3 years from the date of investment, entire amount of gain is added to the investors' income and taxed according to the applicable slab rate.
• No tax is to be paid as long as you continue to hold the units.

Dividends

• Dividends are added to the income of the investors and taxed according to their respective tax slabs. Further, if an investor's dividend income exceeds Rs. 5,000 in a financial year, the fund house also deducts a TDS of 10% before distributing the dividend.