liquid funds are open-ended mutual funds. they invest in money market instruments with maturity up to 91 days. sebi regulations keep expense ratios low. exit loads are minimal or zero.
returns are typically 5-7% annually. savings accounts offer 2.5-3% currently. the difference is significant for idle cash.
starting with a small amount is possible. minimum investments range from ₹99 to ₹5,000 depending on the fund.
minimum investment amounts. small amounts accepted.
most liquid funds accept small initial investments.
| fund name | minimum investment |
minimum sip |
| axis liquid direct | ₹100 | ₹100 |
| hdfc liquid direct | ₹100 | ₹100 |
| aditya birla sl liquid direct | ₹100 | ₹100 |
| icici prudential liquid | ₹99 | ₹99 |
| sbi liquid direct | ₹500 | ₹500 |
| tata liquid fund | ₹5,000 | ₹500 |
| jm liquid fund | ₹1,000 | ₹100 |
| sundaram liquid fund | ₹1,000 | ₹1,000 |
data from fund factsheets and mutual fund platforms.
for ₹99, an investor can start with icici prudential liquid fund. many funds accept ₹100 for lump sum and sip.
direct plans have lower expense ratios than regular plans. jm liquid direct has expense ratio of 0.16% compared to 0.26% for regular plan.
fees to watch. expense ratio and exit load.
expense ratio.
the annual fee charged by the fund. deducted from returns.
| fund type |
typical expense ratio |
| direct plan | 0.07% to 0.22% |
| regular plan | 0.26% to 0.35% |
examples. union liquid direct at 0.07%. axis liquid direct at 0.11%. jm liquid regular at 0.26%.
for ₹1 lakh investment, 0.07% fee is ₹70 per year. 0.35% fee is ₹350. difference is small but meaningful over time.
exit load.
charged if redeemed within a few days.
jm liquid fund charges:
- 0.0070% if redeemed within 1 day
- 0.0065% within 2 days
- 0.0060% within 3 days
- 0.0055% within 4 days
- 0.0050% within 5 days
- 0.0045% within 6 days
after 6-7 days, exit load is zero. most liquid funds have no exit load after 7 days.
other fees.
stamp duty of 0.005% applies on purchases. negligible amount.
no transaction fees on most platforms. some platforms charge small convenience fees. check before investing.
how to start. simple steps.
one. choose direct plan.
lower expense ratio means higher returns. regular plans include distributor commissions.
two. pick a fund with low expense ratio.
union liquid direct (0.07%) and axis liquid direct (0.11%) are among the lowest.
three. use a mutual fund platform.
groww, zerodha coin, paytm money, kuvera. all offer direct plans. minimum investment is ₹100 on most.
four. start with lumpsum or sip.
lumpsum for one-time investment. sip for regular monthly investments. small amounts accepted.
returns vs savings account.
|
option |
current return |
tax treatment |
| savings account | 2.5-3% | taxed at slab rate |
| liquid fund | 5-7% | taxed at slab rate |
difference on ₹1 lakh for one year: ₹6,000 in liquid fund vs ₹2,500 in savings account. gap of ₹3,500.
tax treatment is identical. both taxed at income slab rate. liquid fund gains are short-term capital gains. added to income. taxed at slab rate.
FAQs
1. can a liquid fund be started with ₹100 ?
A. yes. axis liquid direct and hdfc liquid direct accept ₹100 initial investment. icici prudential liquid accepts ₹99.
2. what is the difference between direct and regular plans ?
A.direct plans have lower expense ratios. no distributor commission. higher returns. regular plans include commission, higher expense ratio.
3. is there an exit load on liquid funds ?
A. most funds charge 0.0045-0.0070% if redeemed within 1-6 days. no exit load after 7 days.
4. how are liquid funds taxed ?
A. gains are added to income. taxed at slab rate. same as savings account interest.
5. how fast can money be withdrawn from a liquid fund ?
A. same day if redeemed before cut-off time. next business day otherwise. most platforms offer t+1 settlement.
