How to invest in overnight and Liquid Funds?
The process of investing in overnight fund and liquid fund is the same as that for investing in any other mutual fund scheme. One can invest in these funds through our website/ mobile application or physically submitting the application form at Official Points of Acceptance (POA).
What are the Benefits of investing in Liquid funds?
The benefits of investing in liquid fund schemes are many, including
Potential of better returns as compared to other traditional investments
No exit load for holding beyond 7 days
Easy liquidity of funds
Low risk investment option
The convenience of investing through SIP or in lump sum
How are liquid funds and overnight funds taxed?
The taxation of liquid funds and overnight funds is summarised as below:
Particulars Period of Holding Tax rate
Short Term Capital Gains (STCG)
Long Term Capital Gains(LTCG)
Less than 36 months
36 months or more
Regular tax rates applicable to the investor
20% with indexation benefit
Dividend Income Not applicable Regular tax rates applicable to the investor
Further, if an investor receives a dividend of more than Rs. 5,000 in a year from the mutual fund, TDS @ 10% of such dividend income is also deducted by the mutual fund.
Should I invest a lump sum or SIP in liquid funds?
One can make investments in mutual funds, including liquid funds, through two modes – lump sum or Systematic Investment Plan (SIP). While lump sum investment represents a one-time investment, SIP implies periodical investments made automatically in the specified mutual fund scheme. Liquid funds find their utility as a practical solution for parking of surplus funds and emergency funds. As such, investors may consider investing in liquid funds in lump sum as and when such surplus funds arise.
- * Disclaimer - Past performance is not a guarantee of future returns and may or may not be sustained in the future.
An overnight Fund is a type of debt mutual fund scheme, which invests in overnight securities having a maturity of 1 business day. As such, their portfolio stays immune from the liquidity risk, since it is not dependent upon the secondary markets to liquidate the investments. Instead, the maturity amount flows directly from the issuer entity.
A Liquid Fund is a type of debt mutual fund scheme that invests in debt and money market securities with maturity of up to 91 days only. Due to the short duration of the securities it carries negligible interest rate risk and credit risk. Exit load is charged on the investments in liquid funds if redeemed within seven days from date of investment and for overnight funds the exit load is nil. As such, these funds are preferred for parking short-term surplus funds and for maintaining the emergency fund corpus.
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