Liquid funds seek to maximize current income commensurate with low levels of risk and high liquidity. These funds primarily invest in low duration and liquid investments like money market as well as debt instruments. Liquid funds are ideal for investors looking to park their short term funds yielding higher post tax returns compared to banks and well as for those looking for current income and preservation of capital.
These funds, however, in the recent times have lost their sheen due to higher dividend distribution tax compared to other category of debt funds. Liquid funds currently pay a dividend distribution tax of 28.33% for all categories of investors as compared to 14.16% for individual investors and 22.66% for corporate investors in other debt funds.
Another variant of liquid funds is Liquid Plus funds. These funds are positioned between short term debt funds and liquid funds and are more tax efficient compared to liquid funds.
These funds, however, in the recent times have lost their sheen due to higher dividend distribution tax compared to other category of debt funds. Liquid funds currently pay a dividend distribution tax of 28.33% for all categories of investors as compared to 14.16% for individual investors and 22.66% for corporate investors in other debt funds.
Another variant of liquid funds is Liquid Plus funds. These funds are positioned between short term debt funds and liquid funds and are more tax efficient compared to liquid funds.
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