The affinity towards bank deposits due to their guaranteed and fixed returns is well known. However, the flipside is that these are not tax efficient, as the interest earned is taxable. There are mutual funds that are similar, sans the guaranteed returns, but are tax efficient and a suitable substitute. Not only do they tend to earn better returns, they are as close as bank deposits when it comes to liquidity. Invest in these funds keeping in mind shorter time duration of more than a year and going up to a few years, at best, when you invest in these funds.
