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POSTED BY ON March 1, 2011 4:37 pm COMMENTS (8)
Hi,
I am planning to create a emergency fund. As you are aware that the requirement of the emergency fund is that it should be readily convertible into cash. Secondly, I dont want to keep my money dead ( Eg. cash or bank account where i am getting least interest rates)
So keeping this thing in mind,kindly suggest me what is the best form in which emergency funds should be kept?
Tarun
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tax treatment for bank fd interest is :it would be added to your income, and it would be subject to the tax slab in which your income is falling , no deduction specific to that income is available. for debt mutual fund , for long term gain after 1 yr holding , you can avail reduced rate for long term capital gain (not zero as in case of equity mf.), which i think, 15%(kindly check!). for fixed maturity plan , you can avail two years’ indexation benefit for calculation of such long term capital gain , provided it crossed two yrs as designed.
Dear Tarun, apart from suto sweeping FD which are not tax friendly, you may put your money in Rel. RSF Debt fund. Rel. offers an HDFC Bank Debit card which can be used to redeem money through ATMs 24 Hrs. & performance wise this one is 4 * rated by VROL so not bad either.
Thanks
Ashal
i suggest , fd with sweep-in fascility with saving bank could be better alternative.
Dear Tarun,
You could rather invest in liquid funds of any mutual fund company were you will get a reasonable interest & also there is no entry or exit loads for most of the liquid funds. you can also liquidate immediately were ur money will get credited to ur A/C within T+ 1 days. Please find below for few recommended liquid funds.
Current NAV ROI
Quantum Liquid 13.87 (28-Feb) 6.35 2/28/2011
Birla Sun Life Floating Rate ST Inst 12.91 (28-Feb) 6.34 2/28/2011
Birla Sun Life Floating Rate ST 16.02 (28-Feb) 6.34 2/28/2011
Taurus Liquid Inst 1,068.78 (28-Feb) 6.32 2/28/2011
DWS Insta Cash Plus Super Inst 126.43 (28-Feb) 6.30 2/28/2011
ING Liquid Super Inst 14.53 (28-Feb) 6.29 2/28/2011
Also kindly check this website for better understanding for liquid funds.
http://business.rediff.com/report/2009/jul/14/perfin-all-about-liquid-funds.htm
How about putting it in Bank account with auto sweep in facility – some amount automatically gets converted to FD if have more than a stipulated amount in your account.
No hassles of redemption or any other problem, you are sitting on cash.
But, I guess (not sure, somebody can put his/her comments ), the tax treatment in this case is one of the worst.
How about 50-50 in both, liquid (plus) fund and a bank account !
Can anyone through some light on the tax treatment on FD through auto sweep in account? Why it is considered to be the worst?
Tarun
After some research for my own I found using Auto-sweep facility of savings account is better than anything else, its like sitting on cash but getting FD returns around 6-9%, no fund will give u this return if I’m not wrong.
Putting anywhere else you need to wait for 1 day at least. This is emergency cash and it should be available instantly is what I feel.
I have kept it in Fidelity Cash Fund.
No entry load, no exit load.
Cash is available in 24 hours after redemption.
And you get 5% returns.