From the capital gains/interest taxation point of view, liquid mutual funds are more efficient than bank savings accounts and fixed deposits when the holding period is more than three years. The interest earned on a savings bank account or a fixed deposit is added to your overall income and taxed as per your income tax slab. The interest earned on a savings bank account qualifies for deduction up to Rs 10,000 per financial year under Section 80TTA of the Income Tax Act.\r\rIf your holding period is more than three years, long-term capital gains from a liquid fund is taxed at 20% after considering the indexation benefit. So, you should park your emergency fund money in a liquid mutual fund rather than a bank savings account or fixed deposit.