If I have Rs 2 lakh of idle cash that I don’t want to invest in equity or debt funds, is it advisable to invest it in a liquid fund like the UTI Treasury Advantage fund? if I invest in the UTI Treasury Advantage fund, is the reinvested dividend taxable or not?
-Ankit
Things have changed after the recent budget announcement. The Rs 2 lakh that you have can stay in your savings bank account, you can lay your hands on it at any time and interest income of up to Rs 10,000 from it will be tax-free. Snce there is now a possibility of earning 6-7 per cent from your savings bank account, you can let the money stay there. The difference between the returns of a liquid fund and those from a savings bank account will not be substantial.
This article was originally published on March 27, 2012.
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