Arbitrage Funds: The Tax-Smart Place to Park Cash in 2026

Arbitrage funds earn from the gap between a stock's cash and futures price, not market direction

They are taxed as equity: 20% if sold under a year, 12.5% above ₹1.25 lakh after a year

A liquid fund's gains are taxed at your slab, so high earners often keep more in arbitrage

Returns shrink when RBI cuts rates and spreads narrow, so don't expect a fixed yield

Best for money you can leave for at least 3-6 months; keep emergency cash in a liquid fund

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