Are liquid mutual funds better than savings bank account?
Last updated August 22, 2026
This IPO News guide/article covers “Are liquid mutual funds better than savings bank account?”. The page is organized around what is a saving bank account?, what is a liquid mutual fund?, know the difference: saving bank account v/s liquid funds, taxation on liquid funds investment, 1. short-term capital gain tax on liquid mf;. The source record was published on \",\"Monday, August 13, 2018\",\". IPO News presents the structured facts and tables in its own layout and wording.
Topics Covered
- What is a Saving Bank Account?
- What is a Liquid Mutual Fund?
- Know the difference: Saving Bank Account V/s Liquid Funds
- Taxation on Liquid Funds Investment
- 1. Short-Term Capital Gain Tax on liquid MF;
- 2. Long-Term Capital Gain Tax on liquid MF:
- Taxation on saving account interest
- Why choose Liquid Funds over Saving Account:
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Key Facts
- India's trusted financial research platform since 2015. Live IPO GMP, subscription data, allotment status, Rights Issues, NCDs and unbiased stock broker reviews.
- If you invest in liquid funds for more than 3 years, you have to pay the Long-Term Capital Gain Tax on your investment return. And it is taxable at a flat rate of 20% with the benefits of indexation.
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Data Tables
| Basis of difference | Saving Bank Account | Liquid Funds |
|---|---|---|
| Minimum Balance | Minimum balance is required | No minimum investment required |
| Rate of Returns | Low Return, most of the banks may offer 3.5%-4% annual interest on deposits in savings account. | It offers high Returns, most of the liquid funds offer 7%-8% of annual return. |
| Risk | Keeping money in a saving account is risk-free. | As it held an investment in debt securities which is subject to interest rate risk and credit risk. |
| Liquidity or accessibility | As it held an investment in debt securities which is subject to interest rate risk and credit risk. | You can place a redemption request to withdraw money which will take 1 day to get credited into your bank account. |
| Taxation | Section 80 TTA, No tax on interest-earning less than Rs 10,000. | Capital gain tax including short-term capital gain at applicable income tax slab and long-term capital gain with indexation benefits are levied. |
| Lock-in period | No lock-in-period. | 1 Day lock-in-period |
| Principal Guarantee | A government-backed guarantee up to Rs 1 Lakh | No Guarantee |
Source record: View original public source ↗