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Savings Account   VS   Mutual Funds

One should keep 2-3 month's expenses in the savings bank account. Further 3-6 months regular expenses should be invested in a liquid mutual fund. Anything more than this in the savings bank is an opportunity cost, loss of interest income, and negative returns; if inflation-adjusted returns are considered.
Dividends are Tax free
long-term capital gains tax - 11.33% (including cess and surcharge) or 22.66% with indexation benefit, whichever is lower

FactorSaving AccountLiquid Mutual Fund
Typical Returns4-6%6-7%
Tax (Most Important)*As Per Tax Slab0% after 3 yrs
Lockin PeriodNILNIL
Entry Load and Exit LoadNILNIL
CompoundingQuarterlyDaily
Typical Net Return
(Post Taxes & Penalties)
3%6-7%
Risk FactorLowLow

*Savings account can attract a tax rate as high as 30% depending on your personal tax rate. Debt Mutual Funds have lesser than 5% tax if held for more than three years and same Arbitrage funds have zero tax