Liquid funds are the schemes of mutual funds that invest in money market securities. Usually, the maturity period of these securities is 91 days or less. These funds offer the option of safe investments. These can be invested in short-term targets. Many investors use liquid funds to create emergency funds. Investment in liquid funds can be started from the minimum application amount. This amount is given in the scheme information.
Investors can start investing by filling in a particular application form. For this, you have to issue a cheque or apply online through a mutual fund website portal or any other mutual fund transaction platform. For investment in liquid funds, the investor has to complete the KYC formalities. It has to be completed with KYC Registration Agency. It has to be submitted with all documents (address and proof of identity) by filling a KYC form. The last day's NAV will be applicable to the application and payment received from the investor before 2 pm. If the application and payment is submitted after 2 pm, the same day's NAV applies. Some liquid funds offer a boost to cash in on their investments at any time. In this respect, they are very convenient.
Liquid funds are taxed like debt funds. If liquid fund investment is kept for more than three years, its launch term capital games are taxed at 20 percent with an index benefit. If the investment is held for less than 3 years, capital games are added to the person's income, and the tax is according to the lab in which it comes. Once KYC is done, it applies to all mutual funds and does not require a repeat for every single investment. Since investment is made in short term debt and money market instruments. Therefore, liquid funds are less at risk.
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