Liquid Funds Vs Savings Account: Where To Park Your Idle Cash?

Updated on October 1, 2025 , 20077 views

Certainly, almost all of us have a savings account to store our cash and fulfil all our expenditures. Among them, very few know that there are other ways to park idle cash and earn better returns than a savings account. Liquid Funds are one of those options. Liquid funds are debt mutual fund that invest in liquid assets for a shorter duration of time. While Savings account is a Bank account that works as a liquid fund but offers fixed returns on your savings. Liquid funds not only keep your money available like a savings account but also offer better returns than them. We have mentioned a few features to determine which is better- liquid funds vs savings account. Have a look!

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Why Should you Invest in Liquid Funds Rather Than Savings Account?

Liquid Funds invest in short-term investment instruments like commercial papers, certificates of deposit, treasury bills etc.
With Liquid Mutual Funds one gets the flexibility to invest or withdraw whenever one wants to without any penalty or exit load.
When investing in Mutual Funds, some fund houses also offer ATM card to withdraw money. This further adds on to your convenience.
Some of the Best Liquid Funds offer much better interest rate than that of savings account.

Liquid Funds Vs Savings Account: Where To Invest?

Based on certain parameters, we can figure out the difference between liquid funds and savings account.

Let’s figure out those parameters.

Factors	Liquid Funds	Savings Account
Rate of Return	7-8%	4%
Tax Implications	Short-term Capital gains tax is levied based on investors' applicable income tax slab Tax Rate	Interest rate earned are taxable as per investors' applicable Income tax slab
Ease of Operation	No need to go to a bank to get cash. If there is same amount that needs to be paid, it can be done online	Money gets deposited to the bank account first
Suitable for	Who want to invest their surplus to earn higher return than saving account	Who want to just park their surplus amount

Below are the Top 5 Liquid Funds Performance

Fund	NAV	Net Assets (Cr)	1 MO (%)	3 MO (%)	6 MO (%)	1 YR (%)	3 YR (%)	5 YR (%)	2024 (%)
Indiabulls Liquid Fund Growth	₹2,562.78 ↑ 0.56	₹303	0.5	1.4	3	6.8	6.9	5.5	7.4
PGIM India Insta Cash Fund Growth	₹345.02 ↑ 0.07	₹527	0.5	1.4	3	6.8	7	5.6	7.3
JM Liquid Fund Growth	₹72.2922 ↑ 0.01	₹2,695	0.5	1.4	3	6.7	6.9	5.6	7.2
Axis Liquid Fund Growth	₹2,950.92 ↑ 0.59	₹37,122	0.5	1.4	3.1	6.8	7	5.7	7.4
Tata Liquid Fund Growth	₹4,173.89 ↑ 0.82	₹20,404	0.5	1.4	3	6.8	7	5.6	7.3
Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 3 Oct 25

Research Highlights & Commentary of 5 Funds showcased

Commentary	Indiabulls Liquid Fund	PGIM India Insta Cash Fund	JM Liquid Fund	Axis Liquid Fund	Tata Liquid Fund
Point 1	Bottom quartile AUM (₹303 Cr).	Bottom quartile AUM (₹527 Cr).	Lower mid AUM (₹2,695 Cr).	Highest AUM (₹37,122 Cr).	Upper mid AUM (₹20,404 Cr).
Point 2	Established history (13+ yrs).	Established history (18+ yrs).	Oldest track record among peers (27 yrs).	Established history (15+ yrs).	Established history (21+ yrs).
Point 3	Top rated.	Rating: 5★ (upper mid).	Rating: 5★ (lower mid).	Rating: 4★ (bottom quartile).	Rating: 4★ (bottom quartile).
Point 4	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.	Risk profile: Low.
Point 5	1Y return: 6.83% (upper mid).	1Y return: 6.82% (lower mid).	1Y return: 6.70% (bottom quartile).	1Y return: 6.85% (top quartile).	1Y return: 6.81% (bottom quartile).
Point 6	1M return: 0.47% (bottom quartile).	1M return: 0.49% (top quartile).	1M return: 0.47% (bottom quartile).	1M return: 0.49% (upper mid).	1M return: 0.48% (lower mid).
Point 7	Sharpe: 3.54 (lower mid).	Sharpe: 3.57 (top quartile).	Sharpe: 2.95 (bottom quartile).	Sharpe: 3.41 (bottom quartile).	Sharpe: 3.56 (upper mid).
Point 8	Information ratio: -1.18 (bottom quartile).	Information ratio: -0.64 (lower mid).	Information ratio: -2.17 (bottom quartile).	Information ratio: 0.00 (top quartile).	Information ratio: 0.00 (upper mid).
Point 9	Yield to maturity (debt): 5.88% (lower mid).	Yield to maturity (debt): 5.83% (bottom quartile).	Yield to maturity (debt): 5.83% (bottom quartile).	Yield to maturity (debt): 5.90% (upper mid).	Yield to maturity (debt): 5.94% (top quartile).
Point 10	Modified duration: 0.09 yrs (upper mid).	Modified duration: 0.06 yrs (top quartile).	Modified duration: 0.10 yrs (lower mid).	Modified duration: 0.11 yrs (bottom quartile).	Modified duration: 0.11 yrs (bottom quartile).

Indiabulls Liquid Fund

Bottom quartile AUM (₹303 Cr).
Established history (13+ yrs).
Top rated.
Risk profile: Low.
1Y return: 6.83% (upper mid).
1M return: 0.47% (bottom quartile).
Sharpe: 3.54 (lower mid).
Information ratio: -1.18 (bottom quartile).
Yield to maturity (debt): 5.88% (lower mid).
Modified duration: 0.09 yrs (upper mid).

PGIM India Insta Cash Fund

Bottom quartile AUM (₹527 Cr).
Established history (18+ yrs).
Rating: 5★ (upper mid).
Risk profile: Low.
1Y return: 6.82% (lower mid).
1M return: 0.49% (top quartile).
Sharpe: 3.57 (top quartile).
Information ratio: -0.64 (lower mid).
Yield to maturity (debt): 5.83% (bottom quartile).
Modified duration: 0.06 yrs (top quartile).

JM Liquid Fund

Lower mid AUM (₹2,695 Cr).
Oldest track record among peers (27 yrs).
Rating: 5★ (lower mid).
Risk profile: Low.
1Y return: 6.70% (bottom quartile).
1M return: 0.47% (bottom quartile).
Sharpe: 2.95 (bottom quartile).
Information ratio: -2.17 (bottom quartile).
Yield to maturity (debt): 5.83% (bottom quartile).
Modified duration: 0.10 yrs (lower mid).

Axis Liquid Fund

Highest AUM (₹37,122 Cr).
Established history (15+ yrs).
Rating: 4★ (bottom quartile).
Risk profile: Low.
1Y return: 6.85% (top quartile).
1M return: 0.49% (upper mid).
Sharpe: 3.41 (bottom quartile).
Information ratio: 0.00 (top quartile).
Yield to maturity (debt): 5.90% (upper mid).
Modified duration: 0.11 yrs (bottom quartile).

Tata Liquid Fund

Upper mid AUM (₹20,404 Cr).
Established history (21+ yrs).
Rating: 4★ (bottom quartile).
Risk profile: Low.
1Y return: 6.81% (bottom quartile).
1M return: 0.48% (lower mid).
Sharpe: 3.56 (upper mid).
Information ratio: 0.00 (upper mid).
Yield to maturity (debt): 5.94% (top quartile).
Modified duration: 0.11 yrs (bottom quartile).

Accessibility Of Both

Investing in Liquid Funds is easy and convenient. One can invest in these funds through online banking instruments like mobile apps or online websites. But, to deposit money in a savings account it is mandatory to visit the bank.

Tax On Liquid Funds & Savings Account

The taxation applicable on Liquid Funds is short-term Capital Gains tax, that is calculated based on the tax slab of the investor. While on a savings account, the returns are taxed as per the investor’s tax slab.

Suitability Of Liquid Funds & Savings Account

Liquid funds are suitable for the ones who want to earn better returns than a savings account and want their cash available as well. While savings account is suitable for people who just want to park them money for storage purpose.

So, you must be having a detailed understanding of savings account, best savings rates, and liquid funds, and how the returns of both these investing instruments vary. Though, the decision to choose between liquid funds and a savings account totally depends on the investor, however, it is advised to invest in higher returns yielding Liquid Funds. invest smart, earn better!

Disclaimer:
All efforts have been made to ensure the information provided here is accurate. However, no guarantees are made regarding correctness of data. Please verify with scheme information document before making any investment.