We are all Know Saving Account interest is very Low as 3.5% Annum for popular banks like SBI.
If we keep this amount in liquid funds we may get 7% inwards interest with the flexibility of withdrawal.
What are Liquid Funds?
These are Debt Mutual Funds. With a Short term objective (daily/weekly/monthly) up to 91 days.
. you can get returns according to Market Rates. also known as Money market funds
No Exit Load. (When compared to other mutual funds these sell within 1 year).
| Account | Return/ | Tax | Charges | Risk | Liquidity |
| Saving Account | 3.5% | Added to income | NA | any time | |
| Liquid Funds (MF) | 7-9% | Added to income | expense ratio(2.25%) | Very low Credit & Interest* | any time |
| DEBT FUnds in Stock | 7-9% | Added to income | Broker Fee (0.5+0.5 buy-sell) | Treats as Stock | |
| Fixed Deposit (FD) | 6.4 | Added to income | lockin period | ||
| Recurring Deposit (RD) | Added to income | lockin period |
| Investment Type | Amount | Term | rate of return Annual | total amount | Tax & charges |
| Saving | 100000 | 3 months | 3.5 | 100,000+875 | no tax up to 10k |
| FD | 100000 | 3 months | 5.75 | 100000 +1,425
1425 (added to GTI) |
total interest added to taxable |
| Liquid funds | 100000 | 3 months | 7* | 100000+1,750
1750+562=1188 173.7 (taxable add to GTI) |
STCG 15% on return added to your gross taxable income
2.5% (your investment) for expense ratio 2.25% of 1 lakh 2,250/4= 562 for 3 months * (interest should be added ) |
*Note there is no tax exemption on the invested amount under section 80 C in the above case. but 5 years FD & ELSS helps you.
*Debt funds have some risk (interest rate risk, credit risk, etc.) better returns than fixed deposits (FDs). But this is not guaranteed.
EX: SBI FD rate
- 7-45 days @ 5.75%
- 45-180 days 6.25%
- 180-210 days 6.35%
- 210-360 6.40%
liquid funds interest rate
Depends on market conditions mostly when FD interest rates are low, the Debt funds give you higher returns.
Other Investment Options at Low Risk
- Savings account
- Fixed Deposit
- Certificates of deposit (NSC)
- Treasury bills, notes, bonds (by govt)
- Corporate bonds
- Dividend-paying stocks (market risk but low)
TIP: You can request an Overdraft Account Against FD. repay with extra 1% of your fd rate.
Some Mutual Liquid funds
- Aditya Birla Sun Life Liquid Regular Plan Growth
- ICICI Prudential Liquid Fund Growth
- Reliance Liquid Fund Growth
- UTI Liquid Fund Cash Plan Regular Plan Growth
- Axis Liquid Institutional GrowthKotak Liquid Fund Growth
Debt Funds: Deals with BOnds.
promissory notes (Commercial Paper)
certificate of Deposit (CD): Just like FD But the term is less
Treasury Bills (T-bills): By GOI Rate of interest Low.
A commodity market trades in the primary economic sector such as cocoa, fruit, and sugar. Hard commodities are mined, such as gold and oil.
NOTE: just for Illustration Purpose only, calculations & Market conditions & Your portfolio manipulate the situation.