• Short Term Investments Options

    You have a lot of investment options in India and they can be categorised into short-term and long-term ones. The short-term investments are for short tenures like one year or two years. You can use the returns to buy a bike, jewellery, etc. There are many 1-year investment plans you can invest in. Let us look through 5 short-term investment schemes:

    Recurring Deposits 4%-6% 6 Months to 10 Years
    Savings Account 3.5%-7% NA
    Fixed Deposits 2.5%-5.5% 7 Days to 10 Years
    National Savings Certificate 5 Years 6.80%
    Debt Mutual Funds 8%-11% 6 Months to 3 Years

    Recurring Deposits (RD)

    A recurring deposit is a very common short-term investment option. This scheme allows you to earn a fixed rate of interest on your invested amount until the date of. You can easily open your recurring deposit (RD) account by logging into the bank's net banking portal.

    Features of recurring deposits:

    • Rate of return: 4% to 6% per year
    • Duration: 6 months to 10 years
    • Taxability: The interest you earn is taxed according to your tax slab after adding to your income.

    Savings Account

    A savings account is a popular short-term investment plan. You can deposit your money in a bank/financial institution and you earn interest on the balance in your account. This offers liquidity and you can withdraw the money you have invested at any time. There is no limit on the amount you can deposit, and a lot of banks offer zero balance accounts.

    Features of savings accounts:

    • Rate of return: 3.5% to 7%- different for all banks.
    • Duration: Unlimited
    • Taxability: The interest you earn is taxed according to your tax slab after adding to your income.

    Fixed Deposits (FD)

    A fixed deposit is where you invest an amount for a specific time range that can be between 5 years and 10 years. This will automatically mature and you can withdraw the amount. The interest rates are higher for a fixed deposit as compared to savings accounts and recurring deposits. You cannot make any early withdrawal of the amount.

    Features of fixed deposits:

    • Rate of return: 2.5% to 5.5% per annum
    • Duration: 7 days to 10 years
    • Taxability: The interest you earn is taxed according to your tax slab after adding to your income.

    National Savings Certificate (NSC)

    A National Savings Certificate (NSC) is a short-term tax-saving investment plan. This is available at post offices. This is a government-backed scheme and so, it has a low risk. This scheme gives fixed returns and the interest rates of the scheme are subject to change which is based on the decisions taken by the Finance Ministry.

    Features of National Savings Certificate (NSC):

    • Rate of return: 6.8%
    • Duration: 5 years
    • Taxability: When you invest in a 5-year NSC, you get a tax benefit under Section 80C of the IT Act. The interest income will be taxable.

    Debt Mutual Funds

    A mutual fund invests your money in debt instruments like treasury bills, government bonds, corporate bonds, and commercial papers. This is a short-term investment if you are risk-averse and want short-term returns.

    Features of mutual funds:

    • Rate of return: 8% to 11% per annum
    • Duration: 6 months to 3 years
    • Taxability: Short-term mutual funds are calculated when you redeem your units within three years. Long-term capital gains will be levied if it is held for over three years.

    FAQs on Short Term Investment Schemes to Earn Money

    1. What is the maximum amount I can invest in a savings account?

      There is no limit on the amount you can deposit, and a lot of banks offer zero balance accounts.

    2. Is my income from NSC taxable?

      When you invest in a 5-year NSC, you get a tax benefit under Section 80C of the IT Act. The interest income will be taxable.

    3. What is the risk factor for NCS?

      This is a government-backed scheme and so, it has a low risk.

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