Liquid Fund OR Fixed Deposits – Which one can provide Retirement Income for you.

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Liquid Fund OR Fixed Deposits

The usual concept states that many retirees end up choosing Fixed Deposits as the best & low risk-nature of the investment. The predictability of income and the fixed rate of interest also make them attractive amongst other investment options. But there is a catch – Fixed Deposits are fully-taxed & the interest income is subject to TDS.  

The proportion of retirees depends only on Fixed Deposits just to generate income that can meet their post-retirement needs. With the monthly or quarterly interest arriving in their bank account act as a sort of pension-saving for many.  

Fixed Deposits – The Only Way-out? 

Like said, many retirees choose FDs because of its low-risk and they are fully-taxable + the interest income is liable to TDS. But, if you fall under the highest tax bracket, then you’ll end up paying 30% of your interest income in taxes. After every year, this outflow will become a significant amount. That hurts, right? 

Is there any other way-out to earn the same amount but paying fewer taxes?  

Well, the answer is LIQUID FUND. 

Liquid Funds are debt mutual funds, which invest money in very short-term market instruments such as treasury bills, call money and government securities. These funds invest in instruments with a maturity of 91 days. The returns in the scheme are quite impressive, because the investment doesn’t get affected by market movement. 

Let’s look at the benefits offered by the liquid fund for an investor:   

  • No Exit Load: Liquid Funds have no exit load. In the case of redemption, the fund house doesn’t charge any extra amount.  
  • Quick Withdrawal: It’s one of the best investment vehicles, where an investor can withdraw their amount usually within 24 hours.  
  • Good Return: Liquid fund offers good returns. On average, the liquid fund offers 7 to 10% annual returns.  

Top 3 Recommended Funds 

According to Gulaq methodology,

Fund Name 
IDFC Cash Fund 
IIFL Liquid Fund 
Invesco India Liquid Fund 

It is always advisable for an investor to prefer top AMC’s, as the vital factor before investing in liquid Fund is AMC, not returns because returns are similar in any of the liquid funds.    


Those who are in the highest tax-bracket, Liquid Funds are the better option. The flexibility of withdrawing money is something that can be helpful in emergency cases. So, retirees get set go with Liquid Funds. Explore some at Gulaq (originally spelled as gullak). Else, you can talk to the experts regarding the same. 


*Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing.


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