What are MMMFs? 

Money Market Mutual Funds (MMMFs) or liquid funds are open-ended mutual funds in India that invest solely in money market instruments such as call money, repos, treasury bills, commercial papers, certificates of deposit, and collateralised lending and borrowing obligations (CBLOs). These instruments are forms of debt that mature in less than a year.

what is the aim of these funds?  

The main goal of these funds is to preserve principal and maintain high liquidity; they are, therefore, the least volatile among debt funds. Corporates having surplus cash for extremely short periods of time invest in these mutual funds regularly.

What are the tax considerations? 

Dividend from MMMFs is tax free for the investor. A dividend distribution tax of 25% is, however, payable on the dividend given out. Short-term capital gains, if any, are also taxable at the marginal income tax rate while long-term capital gains are taxable at the rate of 10% without indexation benefits and at 20% with indexation benefits.

Who should invest?

Money Market Mutual Funds are beneficial for investors (individuals/corporates) seeking low-risk investment avenues to park their short-term surpluses and provide one of the best alternatives to low-yield savings bank or short-term bank deposits.