investments to consider for emergency fund if tax slab is 30%

where should one Invest considering the tax slab of a individual is 30%?

  • Fd giving Return 6-7% return

  • Liquid Funds–> Returns slightly greater than FD

  • T bills

Considering above the question arises here is, if any investment instrument is giving return of the 6-7% then, tds deducted is 30%, So at the end the Principal amount= Principal +interest- 30% tds–> loss in principal to some percentage.
Suggest any alternate investment instruments solving the query.
Any solution suggested solution to the above query would be appreciated.

There will not be loss due to this.
TDS is only deducted on interest, not on principal. So your 6% return post tax would be around 4.8%, but it still positive return and no loss in principal.
(Also on a separate note, TDS is not 30%, if you have updated your PAN details, should be 10% TDS)

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Hi @Markus_Lee

You can read about it here for a better understanding of the taxation aspect of these 3 options.

Hi @Akash_Shah,
what do you think about the liquid funds (debt funds) for emergency fund. Taxation for this is 20% LTCG and 30%STCG (As per tax slab).

Hi @Quicko,
Thanks for the link, tax saver fd cannot be considered for emergency funds since they have lock-in period of 5 years.

From this year onwards, taxation for debt fund is same as FD. Both are taxed at slab rate. LTCG for debt fund is gone.

So, in general liquid funds are preferable for emergency funds. But there is no difference in taxation