I am confused between debt funds and liquid funds. Are they same and taxed similarly?

Sarvesh Kumar, Chennai

Liquid funds are type of debt funds which invest in very short term debt instruments with a maturity period of less than 91 days. Generally, liquid funds do not have any exit load. As for taxation, capital gains on liquid funds is applicable just like any other type of debt fund. If you redeem units within three years, you will have to pay tax on the short term capital gains. The gains will be added to your income and taxed as per the income tax slab applicable to you. In case you hold the units for more than three years, the gains will qualify for long-term capital gains tax of 20 per cent with indexation benefit on your original investment.

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