How to achieve more interest yield by placing company's surplus fund into tax exempt fundHow to achieve more interest yield by placing company’s surplus fund into tax exempt fund

Conventional FD vs Placing into Tax Exempt Fund to increase interest yield

One of the way we can increase the net interest yield of our company’s surplus cash fund is to place them under a tax exempt fund of a professional run investment management company. The logic is simple as the tax exempt fund is fully exempted from the normal corporate tax rate of 25% –in more technical jargon the company is  getting “tax shield” by placing such cash into the such tax exempt fund compared to placing into the conventional fixed deposits.

To be even on a safer end,you can place the company’s cash into tax exempt fund account which has  its entire net underlying assets 100% fixed deposits. If you feel that your managment are less risk adverse then do place them into a tax exempt fund with underlying assets with the different types of money market instruments like bonds and commercial papers.

Below are some of the benefits/advantages by placing funds into tax exempt fund:

1. Able to enjoy tax exempted income
2. Enhanced returns comparing to fixed deposits,repo and current account ( reason being the tax exempt fund has the financial muscle to get better interest rate than individual)
3. Do not have to worry about late placement of funds
4. Portfolio diversification
5. Relieve treasurer the time to place funds into conventional fixed deposits ( calling and placing with various financial institutions)
6. Able to withdraw easily re:some tax exempt funds provide easy withdrawl within the next day
7. No front end charges or exit fees
8. Managed by experienced fund managers.

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