do have access to foreign funds through the route of global feeder funds, which are currently being offered by a host of asset management companies. Such global feeder funds are either geographically specific or thematic in nature and provide a nice geographical diversification benefit to an investor’s portfolio. The tax treatment of these global feeder funds depends on its allocation to Indian stocks. Funds that invest at least 65% in Indian stocks and the remaining in international markets are categorised as equity funds. If the above allocation mix is not met, then the global fund would be classified as debt mutual fund for tax treatment. Thus, the long-term gains would be taxed at a flat rate of 10% without indexation, or 20% with indexation. The short-term gains will be added to the investor's income and taxed as per the applicable slab rates. For KYC purpose, investors investing in any category of mutual funds, including foreign mutual funds, have to furnish PAN details, irrespective of the size of their investment.
Can I keep R3 lakh as contingency money in a liquid fund? What should be the duration and how will it be different from fixed deposits?
— Sanjay Bhat
Liquid funds can definitely be used as a good investment avenue to park your contingency fund, as they are considered to be very less risky and are extremely liquid in nature. Liquid funds are a superior alternative to fixed deposits to park contingency money as you are not subjected to any lock-in period, as is the case with fixed deposits. Also, if you stay invested for more than a year, liquid funds are tax-efficient compared to fixed deposits. However, you should keep a good part of the money as liquid cash at home or in a savings account for easy withdrawal.
* The writer is investment analyst, Morningstar India
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