Liquid Fund vs Atuo Sweep
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also can recommend if there's anything else.
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If you are a tax payer like me, liquid fund is the best option. You will be taxed only when you redeem (withdraw) your funds. Otherwise you won't be even if it is till your retirement (and Govt. didn't change the rule). But in Savings or other options your interest will be credited to your account and you will be paying Tax for that. At the same time investment in Mutual fund is more risk than savings / FD
best keep money in small finance bank saving account like bandhan ,au which is upwards of 5.5% upto 5 lakhs.
Does au bank really give 5 % for savings? Is the account available pan India? I don't trust Bandhan.
It really depends on how big your your emergency fund is.
1. Easy access
If you don't have easy access to your emergency fund. The purpose of an emergency fund gets defeated. Fd is the better option here.
2. Taxation
You might not need your emergency fund for years to come. If you were to put it in a liquid fund, you don't have to pay taxes on its gains until redemption. But taxation should not be the deciding point in building an emergency fund.
In my opinion, do a mix of both. Keep up to 1 lakh in a separate liquid fund and the rest in a fd.
A suggestion, kotak bank offers 6 months fd at 7% p.a. There are no penalties for breaking fds with tenure less than 181 days(6 months). So I would park my emergency fund there.
Your fd premature closure proceeds get created to saving ac instantly as well, any time of the day.
depends on various factors like total amount and your tax status
however if you in highest tax bracket then Arbitrage Fund > Liquid Fund > Bank FD/Savings
I'm keeping my emergency fund in Unity Small Finance Bank in the form of FD (highest @ 9%) and rest in Bandhan Bank savings account (highest interest rate among banks)
At any point of time, I keep amount upto Rs. 5L in both the accounts including interest.
Both r good
in Liquid fund max insta redemption is 50k only so even if u divide into multiple funds u can't get let's say 5L to bank immediately, fds win there
Interest rate is similar bt in fd u can lock onto higher tenure and can get better rate than Liquid fund (7% as of now) in small finance banks
Premature penalty can be huge in case of fds while no penalty in Liquid fund