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I want to know about taxation of liquid funds

I plan to invest in a MF Liquid Fund from time to time x, y, z, ...... amounts. After some time (say in 2 or 6 or 12 months (before 3 yrs period when slab taxable. After 3 yrs 20% indexation benefit tax), I withdraw say same x amount (or any amount) then what will be tax implication. I understand in liquid fund the deposit / withdrawal works on first in / first out basis. In that case will the amount = (NAV on withdrawal date - NAV on first deposit date) x units cashed - first deposit amount = Profit Income and tax to be paid at slab rate. Kindly correct me if wrong. Thanks.

Apr 30, 2016 by R. N. Mittra, Mumbai  |   Mutual Fund

The Correct formula will be (NAV on withdrawal date - NAV on deposit date) X Number of units redeemed X your income tax rate.

To have a complete view on taxation of mutual funds including liquid funds, we suggest you to read this article -


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