What is Liquid fund?|returns higher than bank FD

What is a liquid fund?

It is a category of mutual fund which invests in different sectors like the certificate of deposits, treasury bills, commercial papers, and term deposits. Low maturity periods of these funds lead to no lock-in period for investors money. Liquid funds are a good alternative to the savings fund account since the returns are higher compared to the inflation ratio. Liquid funds have no lock-in period and the funds are processed within 24 hours. Liquid funds have the lowest risk because they are invested in fixed security scheme.

      Though the liquid funds don't give a higher return compared to other equity funds, it is better than the savings account. The return rate of liquid funds is higher than the interest rate of many savings bank accounts. Before investing in liquid funds always remember to check the fund house. Liquid funds come with different plans like growth plan, daily dividend plan, weekly dividend plan, and monthly dividend plan.

TAXATION

If you withdraw the liquid fund before a year you will be taxed to the same ratio of your income tax slab. But if you withdraw after a year you will have to pay tax according to long term gain tax of 11.33%(including surcharge and cess). So do a happy investment and earn smart returns.

To know about liquid mutual funds house returns click below:

• SBI Mutual Fund
• HDFC Mutual Fund
• Reliance Mutual Fund
• Axis Bank Mutual Fund

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