Use arbitrage funds to park short-term money

They could offer better post-tax returns than liquid funds and fixed deposits to those in higher tax brackets

Arbitrage funds are gaining in popularity among investors, as is evident from the growing assets under management (AUM) of this category. Seventeen funds had a cumulative AUM of Rs 43,651 crore at the end of August, an increase of 36 per cent over a year. In a declining interest rate environment, knowledgeable retail investors might consider investing in these.  

The primary reason for their popularity is the change in taxation rules of debt funds introduced in Union Budget 2014, which made these eligible for the indexation benefit after three years, instead of one. “Currently, the returns from liquid funds