Liquid funds or low duration funds are good options to park your short term money and get attractive returns (currently 6-7% p.a.). But for people in the highest tax brackets (30%), arbitrage funds make sense as these funds offer Equity taxation but returns like debt funds.

Why Arbitrage funds :

Low Risk - Arbitrage funds offer unique low Risk investment compared to liquid funds or FD.

Tax Advantage

• Theres’s tax advantage due to Equity Taxation for short term 20% and long term (12.5% After 1.25 lakhs)
• Appealing especially for investors in higher tax brackets.

Potential of better returns - Returns are good Arbitrage funds likely to earn 7-8% returns annually.

Liquidity - Investors can redeem their units at any time providing flexibility compared to some other investment vehicle.

In summary Arbitrage funds offer a unique investment strategy that balances risk and return by exploiting price inefficiencies across markets. They are suitable for investors with a low-risk appetite looking for better returns than traditional fixed income options while benefiting from tax efficiencies associated with Equity investments.

A blog from Santosh G Akerkar. For Educational and Awareness purposes.
Best Regards,
Santosh Akerkar