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Benefit Of Tax Efficiency

For a time frame of 3-6 months, liquid fund investments are a better option than bank fixed deposits…

I have a surplus of R 12 lakh which I want to invest for 3 to 6 months instead of having a fixed deposit because of the tax on the interest. Could you please advise a solution?-
Sanjay Rastogi>

Compared to bank deposits, liquid funds are tax efficient. Moreover, dividends from liquid funds are tax-free in the hands of investor. For the time frame that you have in mind; this could be a better option compared to bank deposit.

As liquid funds do not invest any part of assets in securities with a residual maturity of more than 91 days, they are fairly insulated to interest rate variations and are good to park cash for a period of three to six months or even lower time period such as for few days or months.

This article was originally published on July 11, 2011.

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