How much will I earn from a liquid fund investment?

If I invest in liquid funds what returns will I get? Is that return considered as an interest?

--Suhail Faisal

Shweta Jain, Founder & CEO, Investography, responds:

If you invest in a liquid fund, ideally opt for a Growth option. The returns you will make will be similar to your bank account, but the idea here is to ensure that your money stays away from the bank so that you don’t spend it. Although it is easily accessible, it is categorised as an investment so we tend not to use it just because we have money at our disposal. The returns that you make on liquid funds are capital gains here and will be added to your income (if you have stayed invested for less than 3 years) and if it is more than 3 years, you can claim indexation and will be taxed at 20%.