Which would be the best short term investment and its tax implication? Victor Perreira, 22 Oct 2012

I am planning to buy a house in India and may be required to make the payment soon. I hold money in dollars, which I wish to convert into rupees. Can I invest these rupees in some liquid funds? What will be the best short-term investment (1-2 months) and what will be its tax implications?

Fintotal Answer

As you’re planning to park your money for 1-2 months, ultra short-term bond funds or liquid plus funds may be viable options. For the taxation point of view, if you opt for a dividend option, a dividend distribution tax (DDT) of 14.16% is levied on debt funds which the mutual fund will collect from you. In case of the growth option, you sell the units before a year and there is a gain, short-term capital gains tax is applicable.

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