<p>A study conducted by Crisil FundServices has found that liquid funds not only offer higher post-tax returns but also provide a reasonable degree of safety in terms of the principal invested.<br /><br />Liquid funds invest in short-term debt instruments with a maximum maturity of 91 days. They can be redeemed within 24 hours and have no exit load, Crisil said.<br /><br />“Beyond returns, liquid funds also have advantages in terms of liquidity, safety and portability,” Crisil Research Senior Director Mukesh Agarwal said.<br /><br />Over the last 5 years, liquid funds rated by CRISIL have given an annualised post-tax return of 5.78 per cent, compared to 3 per cent given by a savings bank account.<br /><br />“Liquid funds are not totally risk-free and an investor must carry out basic checks before investing. Factors such as the fund house and the scheme vintage, consistent performance over a longer period and comparison of the scheme with appropriate benchmarks can be looked at for selecting the right fund,” Crisil Research Director (Capital Markets) Tarun Bhatia said.<br /><br />The study said that a majority of Indians continue to park a large amount of funds in savings bank accounts. As of March 31, 2010, money in such accounts in scheduled commercial banks stood at Rs 11.36 lakh crore.<br /><br />Within liquid funds the dividend option is more tax- efficient, which is more suitable for investors, who fall within the 20-30 per cent tax brackets.<br /><br />Post tax deduction, liquid funds yield better returns vis-à-vis savings accounts and fixed deposits, wherein the interest earned would be taxed based on an individual’s tax slab, Crisil said. <br /></p>
<p>A study conducted by Crisil FundServices has found that liquid funds not only offer higher post-tax returns but also provide a reasonable degree of safety in terms of the principal invested.<br /><br />Liquid funds invest in short-term debt instruments with a maximum maturity of 91 days. They can be redeemed within 24 hours and have no exit load, Crisil said.<br /><br />“Beyond returns, liquid funds also have advantages in terms of liquidity, safety and portability,” Crisil Research Senior Director Mukesh Agarwal said.<br /><br />Over the last 5 years, liquid funds rated by CRISIL have given an annualised post-tax return of 5.78 per cent, compared to 3 per cent given by a savings bank account.<br /><br />“Liquid funds are not totally risk-free and an investor must carry out basic checks before investing. Factors such as the fund house and the scheme vintage, consistent performance over a longer period and comparison of the scheme with appropriate benchmarks can be looked at for selecting the right fund,” Crisil Research Director (Capital Markets) Tarun Bhatia said.<br /><br />The study said that a majority of Indians continue to park a large amount of funds in savings bank accounts. As of March 31, 2010, money in such accounts in scheduled commercial banks stood at Rs 11.36 lakh crore.<br /><br />Within liquid funds the dividend option is more tax- efficient, which is more suitable for investors, who fall within the 20-30 per cent tax brackets.<br /><br />Post tax deduction, liquid funds yield better returns vis-à-vis savings accounts and fixed deposits, wherein the interest earned would be taxed based on an individual’s tax slab, Crisil said. <br /></p>