What are Short Term Investments?
Short-term investment options, specifically for NRIs, are curated to deliver healthy returns in a comparatively smaller time frame of investment. These investment options allow for investments which offer swifter and foreseeable outcomes. However, it is important to note that short-term investment options might not be able to yield high results when compared to long term investments. Short-term investment options can thus be used with long-term investment options to create a balanced portfolio and meet all your financial goals.
Best Short Term Investment Options - Highlights
Now that you know about the highlights of the best short term investments option in India.
Here are the top 13 best short-term investment plans in India.Â
Best Short Term Investments Options in India for NRI/OCI/PIO
Let’s take a look at the Best short term investment options to invest in 2025.
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ULIP (Unit-Linked Insurance Plans)
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Recurring Deposits
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Savings Account
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National Savings Certificate
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Liquid Funds
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Investments in NCDs/Corporate or Company Deposits
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Treasury Securities
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Debt Instrument
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Bank Fixed Deposits
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Post-office Time Deposits
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Large Cap Mutual Funds
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Stock Market/Derivatives
| Investment Options |
Yearly Returns (in %) |
| Recurring Deposits |
6-7% |
| Savings Account |
2-7% |
| Money Market Account |
5-9% |
| Debt Instrument |
7-11% |
| National Savings Certificate |
6-8% |
| Liquid Funds |
3-5% |
| Investments in NCDs/Corporate or Company Deposits |
8-11% |
| Bank Fixed Deposits |
5-8% |
| Post-office Time Deposits |
5.5% |
| Large Cap Mutual Funds |
8-13% |
| Corporate deposits |
7-8% |
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ULIPs
ULIPs, or Unit Linked Insurance Plans, are a popular investment option for NRIs. These plans offer a unique combination of insurance and investment, allowing NRIs to potentially grow their wealth while ensuring financial security. NRIs can choose from a range of funds based on their risk appetite and investment goals. Additionally, ULIPs offer the flexibility to switch between funds, making them an attractive choice for NRIs looking to optimize their investments over time.Â
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Recurring Deposits
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Tenure- NRIs can open an RD account for a tenure as short as 6 months and in multiples of 3 months, up to 10 years.Â
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Liquidity- Typically, a recurring deposit scheme for NRIs comes with a minimum lock-in period of one month. In the event of premature closure within one month, only the principal amount is returned, and no interest is paid.Â
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Returns- NRI RD accounts offer competitive interest rates, on par with Bank FDs. Currently, for tenures of 12 months and above, the interest rate is 6.5% per annum.Â
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Taxation- The interest earned on the invested amount is added to one’s income and taxed according to the individual's income slab rate. TDS is deducted if the interest earned exceeds Rs. 10,000.
**You can use the online FD calculator to analyze potential returns before making an investment decision for short term investments in india.Â
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Savings Account
For Non-Resident Indians (NRIs) looking to handle their finances from overseas, an NRE and NRO Savings Account offers a convenient and secure option to deposit and manage funds in their home country. This specialised account is tailored to meet the distinct financial needs and preferences of NRIs, providing features like effortless repatriation of funds, competitive interest rates ranging from 2-7%, and seamless online banking services. Â
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National Savings Certificate
National Savings Certificate (NSC) is a popular investment option for Non-Resident Indians (NRIs) looking to secure their financial future. NRIs can avail of the benefits of NSC by investing through designated banks or financial institutions. The NSC offers a stable and secure avenue for NRIs to grow their savings while enjoying tax benefits.Â
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Liquid Funds
Often referred to as money market accounts, NRI Liquid Funds offer a secure way to preserve capital while providing respectable returns. They are considered one of the best short-term investment options in India for Non-Resident Indians.
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Tenure - NRIs can open a money market account for a duration of less than 13 months, providing flexibility in managing short-term finances.
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Liquidity - This short-term investment option in India is highly liquid, allowing NRIs to redeem their investments swiftly when needed.
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Returns - While returns on liquid funds are not guaranteed or fixed, they currently offer an interest rate of 7% per annum.
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Taxation - Profits earned on the invested amount in this short-term investment plan are added to the income of the individual and taxed accordingly. However, profits earned on investments held for more than 36 months are taxed at 20% post-indexation.
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Debt Instrument
Debt instruments offer secure short-term investments for NRIs. Options like liquid funds, ultra-short-duration funds, and low-duration funds cater to various tenures. Liquid debt funds provide high liquidity, outperforming savings accounts. Returns range from 7-9%, with taxation based on tenure.Â
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Bank Fixed Deposits
Fixed deposits, also known as short-term savings instruments, allow individuals, including NRIs, to invest a lump-sum amount in a bank for a fixed period. It is considered one of the safest short-term investment options in India, offering a fixed FD interest rate and providing guaranteed returnS.
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In terms of tenure, NRI investors can choose durations ranging from 7 days to 10 years. Deposits can be renewed upon maturity for reinvestment.
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This short term investment option ensures high liquidity for NRIs and helps manage reinvestment risk effectively.
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Returns on NRI fixed deposit accounts are assured, with interest rates ranging from 8% to 9% for investments over a year. Importantly, these rates remain stable even in times of market volatility.
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Regarding taxation, it's important for NRIs to be aware that FDs can attract a high-income tax rate of up to 30%, including on accrued interest.Â
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Post-Office Time Deposits
Post-office time deposits are one of the safest and best short-term investment plans, offering assured returns. The scheme is provided by India Post and is particularly popular among people residing in rural and remote areas of India.
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Tenure- NRIs can open a post office time deposit scheme for a tenure of 1 year, 2 years, 3 years, or 5 years.
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Liquidity- In the post office scheme, the interest is calculated on the deposited amount annually. Premature withdrawal is not allowed within the first 6 months.
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Returns- The post office time deposit account offers competitive return rates. Below are the returns:
| Account Tenure |
Applicable Interest Rate |
| 1 year account |
6.9% |
| 2-year account |
7.0% |
| 3 years account |
7.0% |
| 5 years account |
7.5% |
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Large Cap Mutual Funds
Large-cap mutual funds are short-term investment plans in India where the investment is made selectively in the stocks of large business organizations to achieve substantial growth in a shorter period of time. These excellent small investment plans can give you quick and smart returns within 1 to 3 years of investment tenure.
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Tenure- One can invest in the large-cap mutual fund for the tenure of 3-5 years.
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Liquidity- The large-cap mutual fund scheme offers high liquidity to the investors along with high returns on investment.
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Returns- As a safe short-term investment option, the risk involved in large-cap mutual fund investments are low and offers a high return of 8%-13%
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Taxation- Capital gain tax is charged on debt funds. The Short-term capital gain tax (STCG) is applicable to the capital gains earned on the fund which is held for the tenure of 3 years. Long-term capital gain tax is applicable on the capital gains earned on the fund which is held for the tenure of more than 3 years.
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Treasury Securities
Treasury securities, also known as treasury bills, stand as an excellent option for short-term investments. These instruments provide high liquidity, ensuring that funds can be accessed easily when needed. Moreover, they offer a safe haven for investment, providing NRIs with peace of mind. The maturity dates of these securities range from 91 days to 365 days.
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Stock Market/Derivatives
Shares, commodities, and derivatives are a favorable avenue for NRI individuals possessing good market knowledge and a high-risk appetite. This investment can be tailored to suit short or long-term financial objectives.
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Investments in NCDs/ Corporate or Company Deposits
For Non-Resident Indians (NRIs), exploring avenues like NCDs (Non-convertible debentures) and Corporate/Company Deposits can be a prudent choice. These investment options offer attractive returns of 9-12% and are tailored to suit the NRI perspective, ensuring compliance with relevant regulations. NRI investors can benefit from the stability and potential for growth that these instruments provide.
How Do Short-Term Investments in India Work for NRIs?
For Non-Resident Indians (NRIs) based in UAE, short-term investment opportunities work in a similar way as domestic investors. Short-term investments in India for Non-Resident Indians (NRIs) function as a strategic financial approach. For shorter durations, NRIs can opt for various instruments like ULIPs, fixed deposits, money market funds, or government securities. These investments offer quick liquidity and flexibility, allowing NRIs to capitalise on opportunities without committing to long-term holdings. The returns, while typically lower than long-term options, provide a balance between security and earning potential, making short-term investments an attractive choice for NRIs looking for quick and efficient financial growth in India.
Taxation on Short-Term Investments by UAE-Based NRIsÂ
The Double Taxation Avoidance Agreement signed by the UAE and India allows your short-term investments to be taxed as per the option you have invested in. The following table summarises the various short-term investments along with the taxation obligations applied on the particular asset class.Â
| Short Term Investment Option |
Taxation |
| ULIPÂ |
For UAE-based NRIs, the gains earned from a ULIP are completely tax-free irrespective of your annual premium. |
| Recurring Deposits |
- If you hold an NRE recurring deposit, your interest will be completely tax-free.Â
- An NRO recurring deposit is generally taxed at 30%. However, as per the UAE-India DTAA, a significant reduction in taxation is provided to UAE-based NRIs, capping the taxation on the interest earned on an NRO recurring deposit at 12.5%.
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| Savings Account |
- If you hold an NRE savings account, your interest will be completely tax-free.Â
- An NRO savings account is generally taxed at 30%. However, as per the UAE-India DTAA, a significant reduction in taxation is provided to UAE-based NRIs, capping the taxation on the interest earned on an NRO savings account at 12.5%.
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| Liquid Funds |
Article 13(5) governs the gains from mutual funds, including liquid funds. The article rests the taxing authority only on the country of residence. The UAE levies 0 tax on personal income and capital gains. The income generated from mutual funds is completely tax-free for NRIs based in the UAE. |
| Investments in NCDs/Corporate or Company Deposits |
The interest or coupon income paid to an NRI on NCDs is subject to 12.5% taxation under the India-UAE DTAA. |
| Treasury securities |
The India-UAE DTAA caps the taxation on the interest earned on government securities at 12.5%
Since the gains earned from a T-bill are not classified as company shares, no tax is levied on them as per the taxation laws in the UAE
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| Debt Instrument |
The interest earned on debt instruments, including corporate bonds and company NCDs, is subject to 12.5% taxation under the India-UAE DTAA. |
| Bank Fixed Deposits |
- If you hold an NRE fixed deposit, your interest will be completely tax-free.Â
- An NRO fixed deposit is generally taxed at 30%. However, as per the UAE-India DTAA, a significant reduction in taxation is provided to UAE-based NRIs, capping the taxation on the interest earned on an NRO fixed deposit at 12.5%.
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| Large Cap Mutual Funds |
Article 13(5) governs the gains from mutual funds, including large cap mutual funds. The article rests the taxing authority only on the country of residence. The UAE levies 0 tax on personal income and capital gains. The income generated from mutual funds is completely tax-free for NRIs based in the UAE. |
| Stock market/ derivatives |
- As per Article 13(4) of the India-UAE DTAA, the gains earned from the sale of company shares are fully taxable in the source country.Â
- Derivatives are completely tax-free provided that you have no physical business presence in India.Â
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Conclusion
Short-term investment options in India provide investors with opportunities to earn decent returns on money parked with the intention of short-term financial goals, liquidation or emergencies. For individuals based in the UAE, this provides them with the opportunity to further benefit from the tax benefits provided to them under the DTAA treaty signed between the UAE and India and make the most out of their investments. You can further explore NRI investment plans and choose the best plan for yourself.Â
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