Safekeeping Funds for a Few Months | Value Research Consider safety tax incidence when investing for near-term predictable expenses...
Ask Value Research

Safekeeping Funds for a Few Months

Consider safety tax incidence when investing for near-term predictable expenses...

I have accumulated about Rs 3 lakh for a purchase to be made after two-three months. Should I leave the money in savings account or put it in a debt fund. If a debt fund, what category?
-Sunil S

There can be three options to park a sum of Rs 3 lakhs for three months. You can also consider fixed deposit along with debt funds and savings account. However, investments in fixed deposit will not be liquid like savings account and debt funds.

Ultra short-term debt funds could have been suitable to park investments with a two-three months tenure with the tax efficiency they offered to investors in highest tax slab. However, from June 2013 the dividends from these funds will be taxed at 25 per cent from the current 12.5 per cent.. This will considerably reduce the tax benefit.

On the other hand, interest from savings bank account and fixed deposit continues to be added to taxable income and taxed as per the slab (30 per cent in case of person falling in highest tax bracket).

You can invest in either of the options as per the tax efficiency. We have calculated gains considering you invest in a five-star rated low-risk fund. Savings account and fixed deposit interest rate have been taken from a popular public sector bank.



Have a different question in mind? Ask us


Other Categories