Full explanation
Fixed Deposit: fixed interest rate (6.5–7.5%), specific tenure (7 days to 10 years), premature withdrawal with penalty (0.5–1% penalty). Returns are taxable as ordinary income. Liquid Mutual Fund: invests in overnight to 91-day instruments, returns approximately 6.5–7.5% (varies), no lock-in, redemption within 24 hours, more tax-efficient for taxpayers in 30% bracket (20% LTCG with indexation after 3 years). For emergency fund: liquid fund > savings account. For investment parking: liquid fund is generally better than FD for those in 20–30% tax bracket.