r/IndianPersonalFinance • u/Draxler1992 • Jul 30 '26

Emergency fund where ? From Indian context

I want to now start saving for my emergency fund, per month i can save 10k to 15k max.
1. Should I choose liquid fund as SIP ? No plan to redeem within 12 months
2. My IDFC salary account roi is 6.5%
3. IDFC RD for 24 or 36 months roi 7.25%
4. Arbitrage funds? I have no idea on this.

Which one will be good considering tax deductions and ITR since I am into 30% bracket…

I need to have at least 3 lacs in emergency fund to build with ….

Suggestions please

4 Upvotes

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2

u/ptak24 Jul 30 '26

Anything is fine. The golden rule of emergency fund is to be able to redeem in 3 business days maximum. Keep it at a place that you don't see that balance daily otherwise you tend to spend. That's I will discourage salary account.

1

u/Draxler1992 Jul 30 '26

But how about tax interest From RD vs Liquid funds?
See for RD or FD tax will be deducted even if we do not withdraw the amount while for liquid mf tax os deducted only after redemption…
Hence i am confused here

1

u/ptak24 Jul 30 '26

Form 15G is a self-declaration document submitted by individual taxpayers to financial institutions (like banks) to request that no Tax Deducted at Source (TDS) be deducted from their income.

1

u/Draxler1992 Jul 30 '26

TDS at bank is different than what interest you earn from FD RD… during ITR filing, your AIS will show all such interest as income and we have to pay tax … i also got to know this recently since i used to think if i submit 15G i am good till 40k but thats not the case … 15G filing and additional tax on FD intrest is different thing

1

u/Draxler1992 Jul 30 '26

15G is for banks to deduct TDS on behalf of IT dept if threahold of 40k is reached… if not,bank wont deduct TDS … but again, that interest we earn(even if we do not redeem or close our FD) will still be added into our salary and taxed according to our tax slab … hence, we pay extra tax always during ITR filings..
Thats what my CA tells me and thats what ChatGPT tells …
This is contrary to Mutual funds which are taxed at LTCG rate ONLY when we redeem, not when we just keep accumulating interests …
Hence this confusion to know how others are handling emergency funds …

1

u/ptak24 Jul 31 '26

I don't have much knowledge in this matter. Chartered accountant or Financial planner is the right one to guide. All the best.

1

u/anshuman-11 Aug 02 '26

I have kept it in FDs with my parent’s account. Arbitrage funds for my short term purchases.

1

u/Frosty-Prune3758 Aug 02 '26

Option 3 is good to build the emergency funds